The underpricing of private targets |
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Authors: | John W Cooney Thomas Moeller Mike Stegemoller |
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Institution: | 1. Rawls College of Business, Texas Tech University, Lubbock, TX 79409, USA;2. Neeley School of Business, Texas Christian University, Fort Worth, TX 76129, USA |
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Abstract: | We examine acquisitions of private firms with valuation histories and find a positive relation between acquirer announcement returns and target valuation revisions. Similar to other studies, acquirer announcement returns are positive, on average. However, positive acquirer announcement returns are mainly driven by targets that are acquired for more than their prior valuation. This relation is consistent with pricing effects associated with target valuation uncertainty and behavioral biases in negotiation outcomes. |
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Keywords: | G24 G34 |
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