GAINS TO BIDDER FIRMS IN CASH AND SECURITIES TRANSACTIONS |
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| Authors: | James W Wansley William R Lane Ho C Yang |
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| Institution: | Louisiana State University, Baton Rouge, LA 70803.;Daishin Securities Co., Ltd., Seoul, Korea. The authors acknowledge and appreciate the beneficial comments of Gershon Mandelker and the anonymous referees of this journal. |
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| Abstract: | This paper presents empirical test results of alternative hypotheses regarding differences in returns to shareholders of bidding firms that choose different payment methods (cash or securities). The evidence is consistent with the payment method signaling hypothesis, which asserts that when management of the bidding firm believes its own stock to be overvalued (undervalued), securities (cash) will be the preferred payment method. The results are not consistent with either the overpayment hypothesis or the present value/hubris hypothesis. The findings also explain the conflicting results reported in prior work on gains to bidding firms. |
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