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Which Takeover Targets Overinvest?

Published online by Cambridge University Press:  09 June 2010

Robert J. Hendershott
Robert J. Hendershott
Affiliation:
Leavey School of Business, Santa Clara University, Santa Clara, CA 95053.
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Abstract

Existing research finds little evidence of overinvestment by successfully acquired targets. This paper shows how samples drawn from completed takeovers are biased against finding overinvestment and documents evidence of overinvestment in targets that use a highly leveraged transaction to avoid a takeover. The evidence also suggests that these restructurings create value by mitigating the targets' overinvestment problems.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 31 , Issue 4 , December 1996 , pp. 563 - 580
Copyright
Copyright © School of Business Administration, University of Washington 1996

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