Acquisitions Driven by Stock Overvaluation

• Main Author: LIN, Leming
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2009
• Subjects: Agency Costs; CEO compensation; Mergers and Acquisitions; Overvaluation; Corporate Finance; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/etd_coll/4; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1003&context=etd_coll
• Institution: Singapore Management University

Overvaluation might drive a firm to use its stock to acquire another firm whose stock is not as overpriced. Though hypothetically desirable, these acquisitions create little, if any, value for acquirer shareholders. Two factors impede value creation for acquirer stockholders from these transactions...