Does asymmetric information affect the premium in mergers and acquisitions?

Georges Dionne (), Mélissa La Haye () and Anne-Sophie Bergerès ()
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Mélissa La Haye: HEC Montreal, Canada Research Chair in Risk Management
Anne-Sophie Bergerès: HEC Montreal, Canada Research Chair in Risk Management

No 10-3, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: We test the influence of information asymmetry on the premium paid for an acquisition. We analyze mergers and acquisitions as English auctions. The theory of dynamic auctions with private and common value predicts that more informed bidders may pay a lower price. We test that prediction with a sample of 1,026 acquisitions in the United States between 1990 and 2007. We assume that blockholders of the target’s shares are better informed than other bidders because they possess privileged information on the target. Our empirical results show that blockholders pay a much lower premium than do other buyers.

Keywords: Asymmetric information test; blockholder; endogeneity; English auction; merger and acquisition; treatment effect (search for similar items in EconPapers)
JEL-codes: C33 D81 G34 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2014-02-01
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Related works:
Journal Article: Does asymmetric information affect the premium in mergers and acquisitions? (2015)
Journal Article: Does asymmetric information affect the premium in mergers and acquisitions? (2015)
Working Paper: Does Asymmetric Information Affect the Premium in Mergers and Acquisitions? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2010_003

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