Abstract
Chinese firms can suspend trading of their stocks when they announce major events. We find that stock-swap acquirers tend to suspend stock trading after a significant stock price run-up. Suspending bidders also show significantly high announcement returns if the bidder pays with stocks, while the returns are negatively associated with the pre-suspension run-up. However, the positive return disappears in the long run. These results suggest stock-swap bidders take advantage of stock trading suspension when they identify overvaluation, providing direct evidence that stock-financed acquirers have an incentive to manage stock prices. The results are robust to firms' corporate governance structures.
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