Financing Irrelevance in Corporate Investment Decisions
Evidence from Acquisitions
- When?
- Wednesday 14 November 2012, 12.30
- Where?
- 62AP02
- Open to:
- Public, Staff, Students
- Speaker:
- Professor Dimitris Petmezas - University of Surrey
- Admission information:
- If you would like to attend please RSVP to fbelevents@surrey.ac.uk
- Refreshments:
Refreshments and a sandwich lunch will be available from 13.00
The Finance and Accounting group would like to invite you to Professor Dimitris Petmezas seminar.
Biography
Professor Dimitris Petmezas is Chair in Finance. Prior to taking up this position he was a Reader and Senior Lecturer in Finance at Surrey Business School (ex-School of Management) and also held the position of Lecturer in Finance at Durham Business School. Professor Petmezas was educated at Aristotle University (BA in Economics) and Durham University (MSc in Finance and Investment with Distinction, and PhD in Finance). He is a Fellow of the Higher Education Academy and a visiting-academic in several European Business Schools teaching in EMBA, MBA and MSc programmes. Professor Petmezas has also been invited to deliver speeches in several Universities in Europe and China. He is an independent M&A advisor and he has also worked as a stock market analyst.
Professor Petmezas' main research interests lie in the area of Corporate Finance and, more specifically, in Mergers and Acquisitions (M&As). His current research focuses on the role of financial and informational intermediaries, as well as corporate governance, in M&As. Professor Petmezas' research also looks into factors that affect value creation for shareholders in M&A activity and its relation with behavioral issues such as managerial overconfidence. Additionally, he is interested in SEOs.
Professor Petmezas has published extensively in top international journals including the Journal of Finance, Financial Management, and the Journal of Banking and Finance. His research has been featured on the programs of various US and European conferences receiving awards, such as the best paper award in International Finance at the Southwestern Finance Association (SWFA) Conference in the US, and quoted in widely read international media, such as the Financial Times and The Economist. Professor Petmezas serves as an ad-hoc referee in several academic journals and also acts as an external examiner in a number of academic institutions.
Abstract
We study whether source of financing affects the value of an investment project in the context of acquisitions. A stock-financed acquisition announcement is a joint announcement of a takeover and an equity issue. Using SEO announcement returns, we estimate through linear prediction and propensity-score matching the share price drop that stock acquirers experience due to the financing choice. Net of this effect, stock-financed acquisitions are not value destructive, and the method of payment has no further explanatory power in the cross-section of acquirer returns. This is consistent with the financing irrelevance principle and inconsistent with the agency costs of overvalued equity story.