Working Paper No. 1157

Misvaluation and Financial Constraints: Method of Payment and Buyer Identity in Mergers & Acquisitions

Published: March 15, 2017Pages: 32Keywords: Mergers and acquisitions; Investments; Asymmetric information; Stock misvaluation; Financial frictionsJEL-codes: D82; G32; G34

Misvaluation and Financial Constraints: Method of Payment and Buyer Identity in Mergers & Acquisitions Aron Berg


The paper studies how stock price misvaluation and financial frictions affect whether an acquisition occurs between or within industries and whether the acquirer pays in cash or stocks. I set up a model where stock market misvaluation correlates within industries and across industries and assume that managers have private information regarding their own firm and firms similar to it. The model yields predictions regarding which firm acquires which firm, and the method of payment used in transactions.

Elgar Companion to

Social Capital and Health

Martin Ljunge okt 2018.jpg

Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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