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Heterogeneous Market Responses and the Listing Effect in M&A

Author

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  • Qingzhong Ma

    (School of Hotel Administration, Cornell University, Ithaca, NY 14853, USA)

  • David A. Whidbee

    (Department of Finance, Insurance, and Real Estate, Washington State University, Pullman, WA 99164-4746, USA)

  • Wei Zhang

    (School of Business, Ithaca College, Ithaca, NY 14850, USA)

Abstract

Unlisted acquisitions differ from listed ones in three important aspects: the possibility of forming blockholders, which substitute debt as a monitoring mechanism; the liquidity discount, which mitigates managerial hubris; and the distinct deal process through which two-sided asymmetric information is revealed. Due to these differences, same firm and deal characteristics could induce heterogeneous market responses, depending on the target listing status. We find that such heterogeneous responses exist in usual characteristics such as method of payment, relative size, acquirer size, leverage, and market-to-book ratios. After these heterogeneous responses are incorporated, the puzzling "listing effect" disappears. Our results also indicate that the conventional approach used to investigate pooled samples of listed and unlisted acquisitions is effectively misspecified due to omitted variables.

Suggested Citation

  • Qingzhong Ma & David A. Whidbee & Wei Zhang, 2012. "Heterogeneous Market Responses and the Listing Effect in M&A," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 1-49.
    • Handle: RePEc:wsi:qjfxxx:v:02:y:2012:i:02:n:s2010139212500073
    DOI: 10.1142/S2010139212500073
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    References listed on IDEAS

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    1. Harford, Jarrad & Humphery-Jenner, Mark & Powell, Ronan, 2012. "The sources of value destruction in acquisitions by entrenched managers," Journal of Financial Economics, Elsevier, vol. 106(2), pages 247-261.
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    Cited by:

    1. Canina, Linda & Carvell, Steven A. & Ma, Qingzhong & Ukhov, Andrey D., 2013. "Business cycle and asset valuation in the gaming industry," Journal of Business Research, Elsevier, vol. 66(9), pages 1689-1695.
    2. Levon Goukasian & Emily J. Huang & Qingzhong Ma & Wei Zhang, 2019. "Are Acquirers Efficiently Priced? Evidence from Subsequent Earnings Announcements," Review of Economics & Finance, Better Advances Press, Canada, vol. 16, pages 15-30, May.

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