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

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  • Ang, James S.
  • Ҫolak, Gӧnül
  • Zhang, Tai-Wei

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.

Suggested Citation

  • Ang, James S. & Ҫolak, Gӧnül & Zhang, Tai-Wei, 2014. "Decoupling by clienteles and by time in the financial markets: The case of two-stage stock-financed mergers," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 360-375.
    • Handle: RePEc:eee:corfin:v:25:y:2014:i:c:p:360-375
    DOI: 10.1016/j.jcorpfin.2014.01.001
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    Cited by:

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    More about this item

    Keywords

    Decoupling hypothesis; Market segmentation; Mergers and acquisitions; Method of payment; SEO/IPO; Use of proceeds;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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