Relative equity market valuation conditions and acquirers’ gains

Dimitris Andriosopoulos, Leonidas Barbopoulos

Research output: Working paper

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Abstract

We examine whether the relative equity market valuation conditions (EMVCs) in the merging firms countries help acquirers’ managers to time the announcements of domestic and foreign target acquisitions. After controlling for several deal- and merging firms-specific features we find that acquisition activity, as well as acquirers gains, are significantly higher during periods of high-EMVCs at home, irrespective of the domicile of the target. We also find that the higher foreign acquirers’ gains that reaped during periods of high-EMVCs at home are realized by deals of targets based in the RoW (=World-G7), rather than G6 (=G7-UK) countries, which is due to the low correlation of EMVCs between the U.K. (home) and the RoW countries. Moreover, acquisition of targets domiciled in the RoW (G6) countries yield higher (lower) gains than domestic targets during periods of high-EMVCs at home. This suggests that the relative EMVCs between the merging firms’ countries allow acquirers’ managers to time the market and acquire targets at a discount, particularly in countries in which acquirers’ stocks are likely to be more overvalued than the targets’ stocks.
Original languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Number of pages30
Publication statusUnpublished - 31 Jan 2016

Keywords

  • acquirers’ gains
  • relative equity market valuation conditions
  • abnormal returns

Research Output

Relative equity market valuation conditions and acquirers' gains

Andriosopoulos, D. & Barbopoulos, L. G., 2 Nov 2016, In : Review of Quantitative Finance and Accounting. p. 1-32 32 p.

Research output: Contribution to journalArticle

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Cite this

Andriosopoulos, D., & Barbopoulos, L. (2016). Relative equity market valuation conditions and acquirers’ gains. University of Strathclyde.