Stock Market Driven Acquisitions

Andrei Shleifer and Robert Vishny

No 8439, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present a model of mergers and acquisitions based on stock market misvaluations of the combining firms. The key ingredients of the model are the relative valuations of the merging firms, the horizons of their respective managers, and the market's perception of the synergies from the combination. The model explains who acquirers whom, whether the medium of payment is cash or stock, what are the valuation consequences of mergers, and why there are merger waves. The model is consistent with available empirical findings about characteristics and returns of merging firms, and yields new predictions as well.

JEL-codes: G34 (search for similar items in EconPapers)
Date: 2001-08
New Economics Papers: this item is included in nep-fmk
Note: AP CF
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Citations: View citations in EconPapers (25)

Published as Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, vol. 70(3), pages 295-311, December.

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