Does investor misvaluation drive the takeover market?

Journal of Finance

Volumn 61, Issue 2, 2006, Pages 725-762

  Dong, Ming ^a   Hirshleifer, David ^b   Richardson, Scott ^c   Teoh, Siew Hong ^b  

^a YORK UNIVERSITY   (Canada)

^b OHIO STATE UNIVERSITY   (United States)

^c UNIVERSITY OF PENNSYLVANIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 33644884202     PISSN: 00221082     EISSN: 15406261     Source Type: Journal    
DOI: 10.1111/j.1540-6261.2006.00853.x     Document Type: Article

References (68)

1. Ali, Ashiq, Lee-Seok Hwang, and Mark A. Trombley, 2003, Residual-income-based valuation predicts future stock returns: Evidence on mispricing versus risk explanations, Accounting Review 78, 377-396.
2. Andrade, Gregor, Mark L. Mitchell, and Erik Stafford, 2001, New evidence and perspectives on mergers, Journal of Economic Perspectives 15, 103-120.
3. Ang, James S., and Yingmei Cheng, 2003, Direct evidence on the market-driven acquisitions theory, Working paper, Florida State University.
4. Baker, Malcolm P., Jeremy C. Stein, and Jeffrey Wurgler, 2003, When does the market matter? Stock prices and the investment of equity-dependent firms, Quarterly Journal of Economics 118, 969-1005.
5. Baker, Malcolm P., and Jeffrey Wurgler, 2000, The equity share in new issues and aggregate stock returns, Journal of Finance 55, 2219-2257.
6. Baker, Malcolm P., and Jeffrey Wurgler, 2002, Market timing and capital structure, Journal of Finance 57, 1-32.
7. Barber, Brad M., and John D. Lyon, 1997, Detecting long-run abnormal stock returns: The empirical power and specification of test statistics, Journal of Financial Economics 43, 341-372.
8. Barberis, Nicholas, and Ming Huang, 2001, Mental accounting, loss aversion, and individual stock returns, Journal of Finance 56, 1247-1292.
9. Bhagat, Sanjai, Ming Dong, David Hirshleifer, and Robert Noah, 2005, Do tender offers create value? New methods and evidence, Journal of Financial Economics 76, 3-60.
10. Bouwman, Christa, Kathleen Fuller, and Amrita Nain, 2004, The performance of stock-price driven acquisitions, Working paper, University of Michigan Business School.
11. Brainard, William C., and James Tobin, 1968, Pitfalls in financial model building, American Economic Review: Papers and Proceedings 58, 99-122.
12. Brealey, Richard A., and Stewart C. Myers, 2000, Principles of Corporate Finance (McGraw-Hill, New York).
13. Brown, David T., and Michael D. Ryngaert, 1991, The mode of acquisition in takeovers: Taxes and asymmetric information, Journal of Finance 46, 653-669.
14. Chan, Wesley S., 2003, Stock price reaction to news and no-news: Drift and reversal after headlines, Journal of Financial Economics 70, 223-260.
15. Chemmanur, Thomas, and Imants Paeglis, 2003, The choice of the medium of exchange in acquisitions: A direct test of the double-sided asymmetric information hypothesis, Unpublished manuscript, Boston College.
16. Cohen, Randolph B., Christopher K. Polk, and Tuomo Vuolteenaho, 2003, The price is (almost) right, Harvard Business School Working Paper Series, No. 03-107.
17. Daniel, Kent D., David Hirshleifer, and Avanidhar Subrahmanyam, 1998, Investor psychology and security market under- and over-reactions, Journal of Finance 53, 1839-1886.
18. Daniel, Kent D., David Hirshleifer, and Avanidhar Subrahmanyam, 2001, Overconfidence, arbitrage, and equilibrium asset pricing, Journal of Finance 56, 921-965.
19. Daniel, Kent D., David Hirshleifer, and Siew Hong Teoh, 2002, Investor psychology in capital markets: Evidence and policy implications, Journal of Monetary Economics 49, 139-209.
20. Daniel, Kent D., and Sheridan Titman, 1997, Evidence on the characteristics of cross-sectional variation in common stock returns, Journal of Finance 52, 1-33.
21. Daniel, Kent D., and Sheridan Titman, 2003, Market reactions to tangible and intangible information, Working paper, Kellogg School.
22. Dechow, Patricia M., and Richard G. Sloan, 1997, Returns to contrarian investment strategies: Tests of naive expectations hypotheses, Journal of Financial Economics 41, 3-27.
23. D'Mello, Ranjan, and Pervin K. Shroff, 2000, Equity undervaluation and decisions related to repurchase tender offers: An empirical investigation, Journal of Finance 55, 2399-2424.
24. Fama, Eugene F., 1998, Market efficiency, long-term returns and behavioral finance, Journal of Financial Economics 49, 283-306.
25. Fama, Eugene F., and Kenneth R. French, 1996, Multifactor explanations of asset pricing anomalies, Journal of Finance 51, 55-84.
26. Frankel, Richard, and Charles Lee, 1998, Accounting valuation, market expectation, and the book-to-market effect, Journal of Accounting and Economics 25, 283-321.
27. Franks, Julian, Robert Harris, and Sheridan Titman, 1991, The postmerger share-price performance of acquiring firms, Journal of Financial Economics 29, 81-96.
28. Fuller, Kathleen, Jeffry Netter, and Mike Stegemoller, 2002, What do returns to acquiring firms tell us? Evidence from firms that make many acquisitions, Journal of Finance 57, 1763-1793.
29. Gort, Michael, 1969, An economic disturbance theory of mergers, The Quarterly Journal of Economics 83, 624-642.
30. Griffin, John M., and Michael L. Lemmon, 2002, Book-to-market equity, distress risk, and stock returns, Journal of Finance 57, 2317-2336.
31. Hirshleifer, David, 2001, Investor psychology and asset pricing, Journal of Finance 64, 1533-1597.
32. Holmstrom, Bengt R., and Steven N. Kaplan, 2001, Corporate governance and merger activity in the U.S.: Making sense of the 1980s and 1990s, MIT Dept. of Economics Working Paper No. 01-11.
33. Jensen, Michael C., 1986, Agency costs of free cash flow, corporate finance, and takeovers, American Economic Review 76, 323-329.
34. Jovanovic, Boyan, and Peter L. Rousseau, 2002, The Q-theory of mergers, American Economic Review 92, 198-204.
35. Jung, Kooyul, Yong-Cheol Kim, and René Stulz, 1996, Timing, investment opportunities, managerial discretion, and the security issue decision, Journal of Financial Economics 42, 159-185.
36. Lakonishok, Josef, Andrei Shleifer, and Robert W. Vishny, 1994, Contrarian investment, extrapolation and risk, Journal of Finance 49, 1541-1578.
37. Lang, Larry H. P., René Stulz, and Ralph A. Walkling, 1989, Managerial performance, Tobin's q, and the gains from successful tender offers, Journal of Financial Economics 24, 137-154.
38. Lee, Charles M. C., James Myers, and Bhaskaran Swaminathan, 1999, What is the intrinsic value of the Dow? Journal of Finance 54, 1693-1741.
39. Loughran, Tim, and Jay Ritter, 1995, The new issues puzzle, Journal of Finance 50, 23-52.
40. Loughran, Tim, and Jay Ritter, 2000, Uniformly least powerful tests of market efficiency, Journal of Financial Economics 55, 361-389.
41. Loughran, Tim, and Anand M. Vijh, 1997, Do long-term shareholders benefit from corporate acquisitions? Journal of Finance 52, 1765-1790.
42. Martin, Kenneth J., 1996, The method of payment in corporate acquisitions, investment opportunities, and management ownership, Journal of Finance 51, 1227-1246.
43. Mitchell, Mark, and Erik Stafford, 2000, Managerial decisions and long-term stock price performance, Journal of Business 73, 287-329.
44. Moeller, Sara B., Frederik P. Schlingemann, and René M. Stulz, 2004, Firm size and the gains from acquisitions, Journal of Financial Economics 73, 201-228.
45. Moeller, Sara B., Frederik P. Schlingemann, and René M. Stulz, 2005, Wealth destruction on a massive scale? A study of acquiring-firm returns in the recent merger wave, Journal of Finance 60, 757-782.
46. Morck, Randall, Andrei Shleifer, and Robert W. Vishny, 1990, Do managerial objectives drive bad acquisitions? Journal of Finance 45, 31-48.
47. Moskowitz, Tobias J., and Mark Grinblatt, 1999, Do industries explain momentum? Journal of Finance 54, 1249-1290.
48. Myers, Stewart C., and Nicholas S. Majluf, 1984, Corporate financing and investment decisions when firms have information that investors do not have, Journal of Financial Economics 13, 187-221.
49. Ohlson, James A., 1995, Earnings, book values, and dividends in equity valuation, Contemporary Accounting Research 11, 661-687.
50. Pinkowitz, Lee, 2000, The market for corporate control and corporate cash holdings, Working paper, Georgetown University.
51. Polk, Christopher, and Paola Sapienza, 2004, The real effects of investor sentiment, Working paper, Northwestern University.
52. Rajan, Raghuram G., and Henri Servaes, 1997, Analyst following of initial public offerings, Journal of Finance 52, 507-530.
53. Rangan, Srinivasan, 1998, Earnings management and the performance of seasoned equity offerings, Journal of Financial Economics 50, 101-122.
54. Rau, P. Raghavendra, and Theo Vermaelen, 1998, Glamour, value and the post-acquisition performance of acquiring firms, Journal of Financial Economics 49, 223-253.
55. Rhodes-Kropf, Matthew, David T. Robinson, and S. Viswanathan, 2004, Valuation waves and merger activity: The empirical evidence, Working paper, Columbia University and Duke University.
56. Ritter, Jay R., 1991, The long-run performance of initial public offerings, Journal of Finance 46, 3-27.
57. Schwert, G. William, 2000, Hostility in takeovers: In the eyes of the beholder? Journal of Finance 55, 2599-2640.
58. Servaes, Henri, 1991, Tobin's Q and the gains from takeovers, Journal of Finance 46, 409-419.
59. Shleifer, Andrei, and Robert W. Vishny, 2003, Stock market driven acquisitions, Journal of Financial Economics 70, 295-311.
60. Skinner, Douglas J., and Richard G. Sloan, 2002, Earnings surprises, growth expectations, and stock returns or don't let an earnings torpedo sink your portfolio, Review of Accounting Studies 7, 289-312.
61. Stein, Jeremy, 1996, Rational capital budgeting in an irrational world, Journal of Business 69, 429-455.
62. Teoh, Siew Hong, Ivo Welch, and T. J. Wong, 1998a, Earnings management and the long-term market performance of initial public offerings, Journal of Finance 53, 1935-1974.
63. Teoh, Siew Hong, Ivo Welch, and T. J. Wong, 1998b, Earnings management and the underperformance of seasoned equity offerings, Journal of Financial Economics 50, 63-99.
64. Teoh, Siew Hong, T. J. Wong, and Gita Rao, 1998, Are accruals during an initial public offering opportunistic? Review of Accounting Studies 3, 175-208.
65. Travlos, Nickolaos G., 1987, Corporate takeover bids, methods of payment, and bidding firm's stock returns, Journal of Finance 42, 943-963.
66. Vassalou, Maria, and Yuhang Xing, 2004, Default risk in equity returns, Journal of Finance 59, 831-868.
67. Verter, Geoffrey, 2003, Timing merger waves, Working paper, Harvard University.
68. Walkling, Ralph A., and Robert O. Edmister, 1985, Determinants of tender offer premiums, Financial Analysts Journal 41, 27-37.