The University of Southampton
University of Southampton Institutional Repository

Endogenous mergers: Bidder momentum and market reaction

Kling, Gerhard and Weitzel, Utz (2010) Endogenous mergers: Bidder momentum and market reaction Applied Financial Economics, 20, (3), pp. 243-254. (doi:10.1080/09603100903282663).

Record type: Article

Abstract

Recent empirical studies on stock misvaluation as a possible determinant of mergers are inconclusive concerning the central hypothesis that over (under) valuation is negatively (positively) associated with merger announcement returns in stock mergers, but not in cash mergers. We provide empirical support for this hypothesis. In contrast to prior research, we employ a two-stage model to account for endogenous mergers and suggest an alternative specification of misvaluation based on an asset-pricing model (bidder momentum). In the first stage, we specify panel logit models to predict US mergers from 1981 to 2003 and find that bidder momentum triggers stock mergers, but not cash mergers. In the second stage, we regress cumulated abnormal returns on merger probabilities to control for the endogeneity of mergers. This reveals a lower market response for stock mergers compared to cash mergers, which we identify as market correction of misvalued acquirers

Microsoft Word Endogenous_mergers.doc - Author's Original
Download (386kB)

More information

Published date: February 2010

Identifiers

Local EPrints ID: 165715
URI: http://eprints.soton.ac.uk/id/eprint/165715
ISSN: 0960-3107
PURE UUID: 14d09696-7d43-4d89-a64c-4ddefc12eccc

Catalogue record

Date deposited: 19 Oct 2010 14:02
Last modified: 18 Jul 2017 12:27

Export record

Altmetrics

Contributors

Author: Gerhard Kling
Author: Utz Weitzel

University divisions

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×