Adra, S. orcid.org/0000-0002-0187-2607 and Barbopoulos, L.G. (2019) Liquidity and information asymmetry considerations in corporate takeovers. The European Journal of Finance, 25 (7). pp. 724-743. ISSN 1351-847X
Abstract
We examine how stock market liquidity and information asymmetry considerations influence the wealth effects of Mergers and Acquisitions (M&As). We present a simple model predicting that M&As of listed targets that have relatively illiquid stocks are profitable for acquirers due to (a) the weak bargaining power of the targets’ shareholders, and (b) the limited information asymmetry concerns when evaluating takeover synergies. Our results show that cash-financed M&As of listed targets that have relatively illiquid stocks are associated with an increase in acquirer risk-adjusted returns. These gains are equivalent to those realized from comparable private target M&As. When engaging in stock-financed listed-target M&As, acquirers with liquid stocks enjoy significant gains when the targets have relatively illiquid stocks. This result holds especially when the deal is announced during periods of deterioration in the overall stock market liquidity. Lastly, we find that liquidity considerations affect the acquirer’s choice of the target firm’s listing status, as well as the M&A method of payment.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2018 Informa UK Limited, trading as Taylor & Francis Group. |
Keywords: | Stock market liquidity; listed targets; private targets; method of payment; takeover premia; risk-adjusted returns |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 13 Sep 2021 10:08 |
Last Modified: | 13 Sep 2021 10:08 |
Status: | Published |
Publisher: | Taylor & Francis |
Refereed: | Yes |
Identification Number: | 10.1080/1351847x.2018.1543202 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:178113 |