Adverse Selection in Acquisitions of Small Manufacturing Firms: A Comparison of Private and Public Targets

Adverse Selection in Acquisitions of Small Manufacturing Firms: A Comparison of Private and... This study investigates acquisitions of small manufacturing firms and compares private and public targets. We develop the argument that private targets tend to involve higher transaction costs in the presence of adverse selection problems than their public counterparts. Consistent with predictions, the empirical evidence indicates that bidders choose to acquire public rather than private targets when acquiring young firms and when engaging in inter-industry transactions. Acquirers also tend to avoid private targets that have significant intangible assets and have not signaled the value of these resources through other means such as collaborative agreements. The results shed light on the benefits of being public and the decision-making criteria employed by acquiring organizations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Adverse Selection in Acquisitions of Small Manufacturing Firms: A Comparison of Private and Public Targets

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2005 by Springer
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-005-5332-y
Publisher site
See Article on Publisher Site

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