Do Mergers and Acquisitions Affect Information Asymmetry in the Banking Sector?

John S. Howe and Thibaut G. Morillon

No 2017-WP-01, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: We investigate the consequences of mergers and acquisitions (M&As) for information asymmetry in the banking sector. We test competing hypotheses about the effect of M&As on the information environment. M&As either increase information asymmetry (the opacity hypothesis) or diminishes it (the transparency hypothesis). We find evidence that information asymmetry increases following M&A announcements and decreases following deal completions. These findings are more pronounced for acquisitions involving a private target, and all-cash deals, as well as for mergers as opposed to acquisition of assets. Additionally, we find that the enactment of Dodd-Frank reduced the levels of information asymmetry. The results are important to regulators, policy makers, and investors.

Keywords: mergers and acquisitions; opacity hypothesis; transparency hypothesis; information asymmetry (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2017-08
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-com and nep-ind
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