Topic: The Role of Stock Liquidity in
Mergers and Acquisitions
Speaker: Sheng Huang, Assistant
Professor of Finance, Lee Kong Chian School of Business, Singapore Management University
Date: April 13th (Wed.)
Time: 2:30-4:00pm
Location: Building 4, Room 101
Language: English
Abstract:
We examine
how stock liquidity affects firms’ M&A decisions. We find that public firms
with more liquid stocks are more likely to make acquisitions and pay for them
with equity. They also pay smaller premium and experience less negative deal
announcement abnormal returns in equity deals. Our identification strategy,
which relies on the change in annual composition of Russell 2000 and Russell
1000 indices that exogenously affects constituents’ stock liquidity, helps to
establish the causal effect of stock liquidity. Consistent with the beneficial
role of stock liquidity in acquisitions, firms tend to take actions to improve
stock liquidity prior to acquisitions. Overall, our study highlights an
important role of stock liquidity in the market for corporate control.
About the speaker:
Sheng Huang is the Assistant Professor of
Finance at Lee Kong Chian School of Business, Singapore Management University. He
received a Ph.D. in Economics from the Washington University in 2009. Dr. Huang’s
research interests include corporate finance, corporate governance and
financial intermediation. He has articles published in the Management Science, the Journal of Financial Intermediation, and the Review of Financial Studies, among
others.
