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CRIEFF Discussion Paper Number 0810

Value Ambiguity and Gains from Acquisitions of Unlisted Targets

Leonidas Barbopoulos, (University of St.Andrews), Krishna Paudyal (Durham Business School), Gioia Pescetto (University of Durham)

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This paper examines the announcement period and the post acquisition gains of UK acquirers of unlisted targets that are subject to value-ambiguity. The evidence shows that target’s age, size, intangibility of assets, and investments can explain the variations in bidding firm’s abnormal returns both in the short- and in the long-run. The findings further show that the gains to bidding firms acquiring unlisted targets are associated with the difficulty in valuing unlisted targets and the means of payment used.

JEL codes: D81, D82, D83, G14, G34
Keywords: mergers and acquisitions, abnormal returns, value-ambiguity, unlisted firms, method of payment

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