The benefits of overvaluation: evidence from mergers and acquisitions

Vagenas-Nanos, E. (2020) The benefits of overvaluation: evidence from mergers and acquisitions. Financial Management, 49(1), pp. 91-133. (doi: 10.1111/fima.12247)

Abstract

Theoretical and empirical evidence debates on whether acquirers can exploit their overvalued equity and create value by purchasing less overvalued or undervalued target firms. Shleifer and Vishny (2003) and Savor and Lu (2009) argue in favor of this, while Fu et al. (2013) and Akbulut (2013) provide evidence against. We revisit this issue and develop a quasi‐experimental design. The misvaluation effect for stock acquirers that are more overvalued than their targets is isolated and measured. Our findings offer direct evidence in favor of the Shleifer and Vishny (2003) market timing hypothesis.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Vagenas-Nanos, Professor Evangelos
• Authors: Vagenas-Nanos, E.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Financial Management
• Publisher: Wiley
• ISSN: 0046-3892
• ISSN (Online): 1755-053X
• Published Online: 14 August 2018
• Copyright Holders: Copyright © 2018 Financial Management Association International
• First Published: First published in Financial Management 49(1):91-133
• Publisher Policy: Reproduced in accordance with the publisher copyright policy