Bidders have an incentive to pay with stock when their shares are overvalued, but target firms should be reluctant to accept such overvalued payment. In a sample of 2,978 acquisitions, we find that stock payment is readily accepted only when the bidder can justify the financing decision in terms...

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...