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Value Ambiguity and Gains from Acquisitions of Unlisted Targets

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  • Leonidas Barbopoulos
  • Krishna Paudyal
  • Gioia Pescetto

Abstract

This paper examines the announcement period and the post acquisition gains of UK acquirers of unlisted targets that are subject to value-ambiguity. The evidence shows that target’s age, size, intangibility of assets, and investments can explain the variations in bidding firm’s abnormal returns both in the short- and in the long-run. The findings further show that the gains to bidding firms acquiring unlisted targets are associated with the difficulty in valuing unlisted targets and the means of payment used.

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Bibliographic Info

Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0810.

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Date of creation: Oct 2008
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Handle: RePEc:san:crieff:0810

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Keywords: mergers and acquisitions; abnormal returns; value-ambiguity; unlisted firms; method of payment.;

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  1. Paul Draper & Krishna Paudyal, 2006. "Acquisitions: Private versus Public," European Financial Management, European Financial Management Association, European Financial Management Association, vol. 12(1), pages 57-80.
  2. Kathleen Fuller & Jeffry Netter & Mike Stegemoller, 2002. "What Do Returns to Acquiring Firms Tell Us? Evidence from Firms That Make Many Acquisitions," Journal of Finance, American Finance Association, American Finance Association, vol. 57(4), pages 1763-1793, 08.
  3. Asquith, Paul, 1983. "Merger bids, uncertainty, and stockholder returns," Journal of Financial Economics, Elsevier, Elsevier, vol. 11(1-4), pages 51-83, April.
  4. Saeyoung Chang, 1998. "Takeovers of Privately Held Targets, Methods of Payment, and Bidder Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 53(2), pages 773-784, 04.
  5. Mara Faccio & Ronald W. Masulis, 2005. "The Choice of Payment Method in European Mergers and Acquisitions," Journal of Finance, American Finance Association, American Finance Association, vol. 60(3), pages 1345-1388, 06.
  6. Jung-Chin Shen & Jeffrey Reuer, 2005. "Adverse Selection in Acquisitions of Small Manufacturing Firms: A Comparison of Private and Public Targets," Small Business Economics, Springer, Springer, vol. 24(4), pages 393-407, 05.
  7. Paul Draper & Krishna Paudyal, 2008. "Information Asymmetry and Bidders' Gains," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 35(3-4), pages 376-405.
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