Cross-border stock-financed mergers and (over)valuation: an event study on acquisition performance

Abstract

Given the tech industry's prominence in M&A activities and its pursuit of knowledge and market expansion (Ma and Liu, 2017), the research aims to examine acquisition performance by investigating the (inter)relation between overvaluation, acquiring motives, financing-method and its consequences for shareholder value creation. The findings cast substantial doubt on the ability of firms to effectively leverage synergies through acquired technology and knowledge. Empirical evidence from this study reveals that acquisitions, regardless of the financing method employed, tend to turn out value destructive. While overvaluation among acquirers can lead to motive misguidance and negatively affect M&A performance (Shleifer and Vishny, 2003), the results of this research highlight that target overvaluation plays a more significant role in driving value destruction. This finding holds true across different deal types and time horizons.