Exploring the Double-Sided Effect of Information Asymmetry and Uncertainty in Mergers and Acquisitions
Publication type
Vlerick strategic journal articlePublication Year
2017Journal
Financial ManagementPublication Volume
46Publication Issue
4Publication Begin page
873Publication End page
917
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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.Knowledge Domain/Industry
Accounting & Financeae974a485f413a2113503eed53cd6c53
10.1111/fima.12170