Abstract
We find that a target with more information asymmetry receives a larger bid premium from the acquirer. We examine the response of the acquirer's investors to the bid to clarify whether the larger bid premium is an overpayment by the acquirer. We observe that the acquirer's investors respond more positively to the acquisition of an opaque target, indicating that the market recognizes the acquirer's valuation of the opaque target and agrees with the offer price. Our results indicate that corporate takeovers help to resolve asymmetric information in the capital market.
Original language | English |
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Pages (from-to) | 976-1016 |
Number of pages | 41 |
Journal | Journal of Business Finance and Accounting |
Volume | 43 |
Issue number | 7-8 |
DOIs | |
Publication status | Published - 1 Jul 2016 |
Externally published | Yes |
Keywords
- acquirer return
- bid premium
- information asymmetry
- price discount
ASJC Scopus subject areas
- Accounting
- Business, Management and Accounting (miscellaneous)
- Finance