Dutordoir, Marie, Strong, Norman C and Sun, Ping ORCID: 0000-0002-5510-8014
(2022)
Does short-selling potential influence merger and acquisition payment choice?
JOURNAL OF FINANCIAL ECONOMICS, 144 (3).
pp. 761-779.
Text
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Abstract
Announcements of stock-financed mergers and acquisitions (M&As) may attract short selling of bidder shares by merger arbitrageurs. We hypothesize that bidders with higher short-selling potential include a higher proportion of cash in their M&A payments to mitigate stock price declines resulting from arbitrage short sales. Consistent with this hypothesis, we find that the ex ante net lending supply of bidder shares has a positive impact on the percentage of cash in public target payments. Further tests, including a placebo analysis of public-to-private deals and an analysis of expected price pressure proxies, corroborate the impact of anticipated arbitrage-related price pressure on payment choice.
Item Type: | Article |
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Uncontrolled Keywords: | Merger arbitrage, M&A payment choice, Short selling |
Divisions: | Faculty of Humanities and Social Sciences > School of Management |
Depositing User: | Symplectic Admin |
Date Deposited: | 10 May 2022 14:17 |
Last Modified: | 01 Oct 2023 01:30 |
DOI: | 10.1016/j.jfineco.2022.03.002 |
Related URLs: | |
URI: | https://livrepository.liverpool.ac.uk/id/eprint/3154553 |