Decoupling by clienteles and by time in the financial markets: The case of two-stage stock-financed mergers

James S. Ang, Gonul Colak, Tai-wei Zhang

Research output: Contribution to journalArticleScientificpeer-review

4 Citations (Scopus)

Abstract

A two-stage stock-financed merger occurs when an acquiring firm first issues shares, and then engages in a cash acquisition shortly afterward. Such deals allow us to test two important hypotheses derived from decoupling: by clienteles via segmentation and by time. The acquirer's value is maximized by selling shares to investors preferring to hold them, and use the raised cash to pay the target shareholders (the decoupling by clienteles hypothesis). Two-stage deals also provide an option to the acquirers by allowing them to decouple their own shares from the correlated target's shares by issuing at an earlier date and wait for good acquisition opportunities (the time decoupling hypothesis). We find empirical evidence in support of both hypotheses.
Original languageEnglish
Peer-reviewed scientific journalJournal of corporate finance
Volume25
Pages (from-to)360-375
Number of pages16
ISSN0929-1199
DOIs
Publication statusPublished - 01.04.2014
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • Decoupling hypothesis
  • Market segmentation
  • Mergers and acquisitions
  • Method of payment
  • SEO/IPO
  • Use of proceeds

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