Do acquirers with more uncertain growth prospects gain less from acquisitions?
By: Sara B. Moeller, Frederik P. Schlingemann, Rene M. Stulz.
Contributors: Schlingemann, Frederik P.; Stulz, René M.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10773; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10773.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Stockholders.; Tender offers (Securities)
Description: "Behavioral finance models imply that an increase in shares outstanding leads to a lower stock price for firms with greater diversity in opinion among investors.  Information asymmetry models imply that share issues by firms with greater information asymmetries are accompanied by larger share price decreases.  Valuation models predict a negative relation between uncertainty resolution and share prices.  Acquisition announcements are used to investigate these predictions.  We find acquirer abnormal returns for acquisitions of public firms paid for with equity (but not for acquisitions of private firms paid for with equity) are lower for firms with higher dispersion of analyst forecasts, larger change in dispersion of analyst forecasts, and higher idiosyncratic volatility.  The opposite result holds for acquisitions of public firms paid for with cash for idiosyncratic volatility.  We show that this evidence can best be explained by models that emphasize information asymmetries, but the behavioral models and valuation models explain part of the evidence"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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