Does Stock Misvaluation Differentiate the Motives for Takeovers?
) (Department of Finance, National Taiwan University, 106 Taipei, Taiwan) Bai-Jia Hsu (Department of Finance, National Taiwan University, 106 Taipei, Taiwan) Abstract We use pre-offer market valuations to examine the motives for takeovers under the misvaluation theory. According to previous literature, the motives for merger and acquisition consist of synergy, agency and hubris. We find that overvalued acquirers paying by cash have the motives of synergy and hubris. However, overvalued acquirers paying by stock have the motives of agency and hubris. On the other hand, the motive of undervalued acquirers paying by cash is only hubris. Lastly, the motives of those undervalued acquirers paying by stock are synergy and hubris. In this study, we provide the empirical evidence to show that acquirers’ stock misevaluation and their payment methods will differentiate the motives for takeovers. Download InfoTo download: If you experience problems downloading a file, check if you have the proper
