Acquisitions Driven by Stock Overvaluation: Are They Good Deals?

• Main Authors: FU, Fangjian, LIN, Leming, OFFICER, Micah
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2008
• Subjects: Mergers and acquisitions; Takeovers; Overvaluation; Agency costs; CEO compensation; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3041; https://www.business.uconn.edu/finance/seminars/papers/Stock_Overvaluation.pdf
• Institution: Singapore Management University

Stock overvaluation might drive a firm to use its stock to acquire another firm whose stock is not overpriced to the same extent. Though hypothetically desirable, these acquisitions end up bringing little benefit, if any, to acquirer shareholders. Two factors, acquirers paying a large premium to the...