 Volatility of implied volatility and mergers and acquisitionsSandra Betton, Nabil El Meslmani and Lorne Switzer Journal of Corporate Finance, 2022, vol. 75, issue C Abstract: In this paper, we examine how uncertainty about risk, based on firm estimates of volatility of implied volatility (VIV) affects mergers and acquisitions. We show that uncertainty about risk, captured by firm estimates of volatility of implied volatility (VIV) affects both bidder and target announcement returns and the method of payment. For high-risk firms, bidder firm VIV negatively effects the likelihood of a cash-only offer. For low-risk firms, bidder firms (target firms) VIV negatively (positively) affects bidder firm's announcement returns. Target announcement returns for low-risk firms are negatively related to bidder firm VIV. When we control for the volatility level using firm estimates of average implied volatility, VIV effects on announcement returns are sustained. However, average volatility effects subsume bidder firm VIV effects on the method of payment. Furthermore, high risk bidder firms revise their offer price upward with an increase in bidder VIV for non-cash offers. Keywords: Mergers and acquisitions; Informed trading; Volatility of implied volatility; Uncertainty about uncertainty; Uncertainty about risk (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:75:y:2022:i:c:s0929119922000864 DOI: 10.1016/j.jcorpfin.2022.102243 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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