This paper uses pre-offer market valuations to evaluate the misvaluation and Q theories of takeovers. Bidder and target valuations (price-to-book, or price-to-residual-income-model-value) are related to means of payment, mode of acquisition, premia, target hostility, offer success, and bidder and target announcement-period returns. The evidence is broadly consistent with both hypotheses. The evidence for the Q hypothesis is stronger in the pre-1990 period than in the 1990-2000 period, whereas the evidence for the misvaluation hypothesis is stronger in the 1990-2000 period than in the pre-1990 period. © 2006 by The American Finance Association.
CITATION STYLE
Dong, M., Hirshleifer, D., Richardson, S., & Teoh, S. H. (2006). Does investor misvaluation drive the takeover market? Journal of Finance, 61(2), 725–762. https://doi.org/10.1111/j.1540-6261.2006.00853.x
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