The Wealth Effects of Fairness Opinions in Takeovers

Tingting Liu

The Financial Review, 2018, vol. 53, issue 3, 533-568

Abstract: This paper explores the wealth effects associated with a bidder's decision to solicit a fairness opinion in a takeover transaction. Using a hand‐collected sample with bidders’ filing proxy statements, this paper finds that the use of fairness opinions does not negatively affect bidder shareholders’ wealth, a finding that contradicts prior studies’ findings. In addition, I find a positive wealth effect associated with bidder use of fairness opinions in the post‐Rule 2290 period. Collectively, these results are consistent with a fairness opinion being used by bidder management as a means to facilitate transactions rather than a mechanism to entrench management.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:53:y:2018:i:3:p:533-568

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