Publication Type

Master Thesis


Overvaluation might drive a firm to use its stock to acquire another firm whose stock is not as overpriced. Though hypothetically desirable, these acquisitions create little, if any, value for acquirer shareholders. Two factors impede value creation for acquirer stockholders from these transactions (despite large differences in relative overvaluation at announcement): acquirers paying large premiums to targets, and investors' correction of acquirer overvaluation during the bid period. Furthermore, acquirer CEOs obtain a large amount of new stock and option grants after acquisitions and realize a net gain in wealth, further suggesting that equity overvaluation increases agency costs and the resulting actions benefit managers more than shareholders (Jensen (2005)).

Year Dissertation/Thesis Completed



Agency Costs, CEO compensation, Mergers and Acquisitions, Overvaluation


Business Administration, Management, and Operations

Degree Awarded

Master of Science in Finance


Fu Fangjian


Lee Kong Chian School of Business