• DOI:10.1016/J.JFINECO.2013.02.013
Corpus ID: 11639507

Acquisitions Driven by Stock Overvaluation: Are They Good Deals?

@article{Fu2013AcquisitionsDB,
  title={Acquisitions Driven by Stock Overvaluation: Are They Good Deals?},
  author={Fangjian Fu and L. Lin and M. S. Officer},
  journal={Journal of Financial Economics},
  year={2013},
  volume={109},
  pages={24-39}
}

Fangjian Fu, L. Lin, M. S. Officer

Published 2013

Business

Journal of Financial Economics

Theory and recent evidence suggest that overvalued firms can create value for shareholders if they exploit their overvaluation by using their stock as currency to purchase less overvalued firms. We challenge this idea and show that, in practice, overvalued acquirers significantly overpay for their targets. These acquisitions do not, in turn, lead to synergy gains. Moreover, these acquisitions seem to be concentrated among acquirers with the largest governance problems. CEO compensation, not… CONTINUE READING

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