Equity issuance and adverse selection: A direct test using conditional stock offers

  • Houston J
  • Ryngaert M
  • 34


    Mendeley users who have this article in their library.
  • 53


    Citations of this article.


We conduct a unique test of adverse selection in the equity issuance process. While common stock is the dominant means of payment in bank mergers, stock acquisition agreements provide target shareholders with varying degrees of protection against adverse price movements in the bidder's stock between the time of the merger agreement and the time of merger completion. We show that it is the degree of protection against adverse price changes and not the percent of stock offered in a bank merger that explains bidder merger announcement abnormal returns. This result is difficult to explain outside of an adverse selection framework. [ABSTRACT FROM AUTHOR]

Author-supplied keywords

  • BANK mergers
  • BANKING industry
  • CONSOLIDATION & merger of corporations
  • CORPORATE reorganizations
  • FINANCIAL risk management
  • RISK management in business
  • SALE of business enterprises
  • SECURITIES -- Prices
  • STOCKS (Finance) -- Prices
  • STOCKS (Finance) -- Rate of return

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document


  • Joel F. Houston

  • Michael D. Ryngaert

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free