| Author: | Rhodes-Kropf, M. Robinson, D.T. Viswanathan, S. |
| Title: | Valuation waves and merger activity: the empirical evidence |
| Journal: | Journal of Financial Economics
2005 : SEP, VOL. 77:3, p. 561-603 |
| Index terms: | mergers pricing valuation |
| Language: | eng |
| Abstract: | In order to test recent theories suggesting that valuation errors affect merger activity, the study develops a decomposition that breaks the market-to-book ratio (M/B) into three components: the company-specific pricing deviation from short-run industry pricing; sector-wide, short-run deviations from companies' long-run pricing and long-run pricing to book. Strong support for recent theories by Rhodes-Kropf (2004) and Shleifer and Vishny (2003), which predict that misvaluation drives mergers is found. |
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