INFORMATION ASYMMETRY, MANAGEMENT CONTROL, AND METHOD OF PAYMENT IN ACQUISITIONS

Ken C. Yook · George M. McCabe

28 citations0/0 files storedThe Journal of Financial Research

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Corporate Finance and Governance Financial Markets and Investment Strategies Auditing, Earnings Management, Governance

Abstract

Abstract We examine the information asymmetry hypothesis and the management control hypothesis by examining the relation between insider trading and insider holdings to the choice of payment method in acquisitions. Our results indicate that both insider ownership and insider trading are significantly related to payment method. These results provide additional evidence for both the management control theory and the asymmetric information theory in the choice of payment method in acquisitions. Furthermore, we find a significant relation between insider trading activity and the market reaction to the announcement of acquisitions. We conclude that information asymmetry exists in the takeover market and that it influences the payment method decision.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1988Managerial control of voting rights 1987Corporate Takeover Bids, Methods of Payment, and Bidding Firms' Stock Returns 1986Investment banking and the capital acquisition process 1988Corporate control contests and capital structure 1990Insider Trading in the OTC Market 1990Corporate Control and the Choice of Investment Financing: The Case of Corporate Acquisitions 1990Corporate Control and the Choice of Investment Financing: The Case of Corporate Acquisitions

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2020Institutional distance and cross-border M&A performance: A dynamic perspective 2019A new order of financing investments: Evidence from acquisitions by India’s listed firms

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