Review of Financial Studies Vol. 31 No. 10 2018
The Timing and Method of Payment in Mergers when Acquirers Are Financially Constrained
open access
Abstract
Although acquisitions are a popular form of investment, the link between rms' nancial constraints and acquisition policies is not well understood. We develop a model in which nancially constrained bidders approach targets, decide how much to bid and whether to bid in cash or in stock. In equilibrium, nancial constraints do not aect the identity of the winning bidder, but they lower bidders' incentives to approach the target. Auctions are initiated by bidders with low constraints or high synergies. The use of cash is positively related to synergies and the acquirer's gains from the deal and negatively to nancial constraints. (D44, G32,
- DOI
- 10.1093/rfs/hhx126
- Volume
- 31
- Issue
- 10
- Pages
- 3937-3978
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref