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.

Interdisciplinary European Studies

The European Union and the Return of the Nation State

9783030350048_200x_the-european-union-and-the-return-of-the-nation-state.jpg

This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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