Exploring the Double‐Sided Effect of Information Asymmetry and Uncertainty in Mergers and Acquisitions
Luypaert, Mathieu Van Caneghem, Tom
Luypaert, Mathieu
Van Caneghem, Tom
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Journal article with impact factor
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Supervisor
Publication Year
2017-12
Journal
Financial Management
Book
Publication Volume
46
Publication Issue
4
Publication Begin page
873
Publication End page
917
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Abstract
Abstract We examine the joint effect of bidder and target information asymmetry and uncertainty on the payment consideration and subsequent wealth effects in a large sample of acquisitions with both listed and private targets. In line with a risk‐sharing argument, we find that acquisitions of targets characterized by higher uncertainty are more likely to be settled with stock. In contrast, higher target information asymmetry increases the likelihood of a cash payment, consistent with bidders strategically exploiting superior information. Acquirers of more opaque targets obtain a larger fraction of total acquisition gains and avoid sharing these gains with target shareholders by offering cash.
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Keywords
3501 Accounting, Auditing and Accountability, 3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 3507 Strategy, Management and Organisational Behaviour, Clinical Research