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Are small firms less vulnerable to overpriced stock offers?

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  • Vijh, Anand M.
  • Yang, Ke

Abstract

We show an inverted-U relation between targetiveness (probability of being targeted) and firm size. However, this pattern describes stock offers and is more pronounced during hot markets characterized by higher stock valuations. For cash offers we find a negative and monotonic relation. These contrasting patterns suggest that small firms (in the bottom NYSE size quartile) are less vulnerable to overpriced stock offers. In addition, we find that the stock acquirers of small targets are less overvalued than those of large targets, and that the announcement returns are less negative for stock acquirers of small targets than for those of large targets.

Suggested Citation

  • Vijh, Anand M. & Yang, Ke, 2013. "Are small firms less vulnerable to overpriced stock offers?," Journal of Financial Economics, Elsevier, vol. 110(1), pages 61-86.
    • Handle: RePEc:eee:jfinec:v:110:y:2013:i:1:p:61-86
    DOI: 10.1016/j.jfineco.2013.05.003
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    More about this item

    Keywords

    Firm size effect; Mergers and acquisitions; Overvaluation; Opinion divergence; Equity issuance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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