The Timing and Method of Payment in Mergers when Acquirers Are Financially Constrained
Name
GoMa_2017-10-30_CMG_ce wo OA.pdf
Description
Accepted version
Size
556.54 KB
Format
Adobe PDF
Checksum (MD5)
932551d9d16606277aa7fd91d47a65de
Author(s)
Gorbenko, Alexander S
Malenko, Andrey
Date Issued
December 2017
Journal
Review of Financial Studies
Publisher
Oxford University Press (OUP)
Citation
Gorbenko, Alexander S. and Andrey Malenko. "The Timing and Method of Payment in Mergers when Acquirers Are Financially Constrained." Review of Financial Studies 31, 10 (October 2018): 3937-3978 © 2018 The Author(s)
Version
Author's final manuscript
Abstract
Although acquisitions are a popular form of investment, the link between firms' financial constraints and acquisition policies is not well understood. We develop a model in which financially constrained bidders approach targets, decide how much to bid and whether to bid in cash or in stock. In equilibrium, financial constraints do not affect the identity of the winning bidder, but they lower bidders' incentives to approach the target. Auctions are initiated by bidders with low constraints or high synergies. The use of cash is positively related to synergies and the acquirer's gains from the deal and negatively to financial constraints.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1093/rfs/hhx126
