Liquid Stock as an Acquisition Currency (CEIBS Working Paper, No. 018/2020/FIN, 2020)

Sheng Huang, Johan Maharjan, Vikram Nanda, Nishant Dass

Research output: Working paper

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We examine how stock liquidity affects acquisitions. We hypothesize that liquidity enhances acquirer stock as an acquisition currency, especially when the target is relatively less liquid. As hypothesized, more liquid firms are more likely to make acquisitions and the difference in stock liquidity between acquirer and target firms increases payment with stock, reduces acquisition premiums, and improves acquirer announcement returns in equity deals. To exploit benefits of liquidity, firms take steps to improve stock liquidity prior to stock acquisitions. Our empirical identification relies on policy initiatives that exogenously increase stock liquidity.
Original languageEnglish
Publication statusIn preparation - 1 Jan 2020


China Europe International Business School (CEIBS)


  • Decimalization
  • Mergers and Acquisitions
  • Stock Liquidity


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