Does investor misvaluation drive the takeover market

This paper uses pre-offer market valuations to evaluate the misvaluation and Q the-ories of takeovers. Bidder and target valuations (price-to-book, or price-to-residual-income-model-value) are related to means of payment, mode of acquisition, premia, target hostility, offer success, and bidder and target announcement-period returns. The evidence is broadly consistent with both hypotheses. The evidence for the Q hy-pothesis is stronger in the pre-1990 period than in the 1990–2000 period, whereas the evidence for the misvaluation hypothesis is stronger in the 1990–2000 period than in the pre-1990 period. Now I’ll use my hype-inflated stock to buy companies that have real value. —Dogbert speaking to Ratbert, Excuse Me While I Wag