Equity or Cash? The Signal Sent by the Way You Pay

M. Sushka, U. HEGE

Harvard Business Review

May 2009, vol. 87, n°5, pp.22

Departments: Finance

The article reports on a study of asymmetric market information and corporate transactions such as the purchase of assets. The researchers found that buyers want to pay with equity instead of cash when they believe that their shares are overvalued and sellers want to receive equity when they believe the asset will create value for the buyer.*ASSETS (Accounting)*CORPORATIONS -- Finance*INFORMATION asymmetry*RETURN on assets*CAPITAL*VALUE