Firm value and investment policy around stock for stock mergers
We study a sample of publicly traded firms that expand by acquiring other firms in pure, stock-for-stock mergers. After these mergers, we find that the diversification premium decreases for the acquiring firm due to having added a target firm trading at a discount. Furthermore, the acquiring firm experiences a decrease in investment opportunities and a decrease in leverage. This is an effect confined only to non-diversifying mergers. Our results indicate that the acquirer’s investment efficiency at the firm level remains unchanged after the merger.
Adel Bino and Elisabeta Pana. "Firm value and investment policy around stock for stock mergers" Review of Quantitative Finance and Accounting 37.2 (2011): 207-221.