Target information asymmetry and takeover strategy: Insights from a new perspective

Paul Borochin, Chinmoy Ghosh and Di Huang

European Financial Management, 2019, vol. 25, issue 1, 38-79

Abstract: We examine the relation between information asymmetry and firm value around a merger and acquisition (M&A). Owing to the due diligence and intense scrutiny around M&A announcements, acquisitions are significant shocks to a target's information asymmetry. We find that M&A announcement‐period wealth gains are significantly related to a target's information asymmetry and the relationship is concentrated in same‐state or same‐industry mergers. Our difference‐in‐difference analysis shows that the wealth effects become weaker when the overall information environment improves. Furthermore, we document that information asymmetry is an important factor in target selection and the likelihood of diversifying deals, deal size, and deal closure time.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1111/eufm.12199

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:eufman:v:25:y:2019:i:1:p:38-79

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1354-7798

Access Statistics for this article

European Financial Management is currently edited by John Doukas

More articles in European Financial Management from European Financial Management Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().