Do Stock-Financed Acquisitions Destroy Value? New Methods and Evidence

Golubov, Andrey; Petmezas, Dimitris; Travlos, Nickolaos G.

Abstract

We contribute to the debate on whether stock-financed acquisitions destroy value for shareholders. A stock-financed acquisition is a joint takeover/equity-issue event. Using seasoned equity offering announcement returns, we estimate through linear prediction and propensity-score matching the share price drop that stock acquirers experience due to the financing choice. Net of this effect, stock-financed acquisitions are not value destructive, and the method of payment generally has no further explanatory power in the cross-section of acquirer returns. Our evidence is largely inconsistent with the agency costs of overvalued equity hypothesis.

Citation

Golubov, A., Petmezas, D., & Travlos, N. G. (2016). Do Stock-Financed Acquisitions Destroy Value? New Methods and Evidence. Review of Finance, 20(1), 161-200. https://doi.org/10.1093/rof/rfv009

• Journal Article Type: Article
• Acceptance Date: Feb 19, 2015
• Online Publication Date: Apr 11, 2015
• Publication Date: 2016-03
• Deposit Date: Jul 29, 2020
• Publicly Available Date: Jul 29, 2020
• Journal: Review of Finance
• Print ISSN: 1572-3097
• Electronic ISSN: 1573-692X
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 20
• Issue: 1
• Pages: 161-200
• DOI: https://doi.org/10.1093/rof/rfv009
• Public URL: https://durham-repository.worktribe.com/output/1259519
• Related Public URLs: https://epubs.surrey.ac.uk/820736/