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The value of (stock) liquidity in the M&A market

Massa, Massimo and Xu, Moqi (2013) The value of (stock) liquidity in the M&A market. Journal of Financial and Quantitative Analysis, 48 (5). pp. 1463-1497. ISSN 0022-1090

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Identification Number: 10.1017/S0022109013000604


We study the value of stock liquidity in the market for corporate control and show that the target firm’s liquidity has an impact on the transaction itself as well as on the resulting merged entity. We use a sample of US M&A transactions 1987 through 2007 to show that acquiring a more liquid firm makes the stock of the acquirer more liquid. This has consequences on M&A activity and pricing. Public acquirers are more likely than private acquirers to acquire more liquid targets. It also translates into a greater likelihood of completing the deal and higher compensation for the target.

Item Type: Article
Official URL:
Additional Information: © 2013 Michael G. Foster School of Business, University of Washington
Divisions: Finance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Date Deposited: 06 Aug 2013 15:23
Last Modified: 20 Sep 2021 02:49

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