Target Firm-Specific Information and Acquisition Efficiency

Xiumin Martin · Ron Shalev

105 citations0/0 files storedManagement Science

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Corporate Finance and Governance Financial Markets and Investment Strategies Merger and Competition Analysis

Abstract

This study investigates whether firm-specific information about targets improves acquisition efficiency. We define acquisition efficiency as the total surplus generated by an acquisition and measure it as the difference in the value of the merged firm and the sum of the two firms operating separately. We find a positive association between target firm-specific information and acquisition efficiency that is driven mainly by diversifying acquisitions. Additional evidence suggests that both the likelihood of the withdrawal of an announced acquisition and the likelihood of a future divestiture of a target decrease with target firm-specific information. Taken together, our findings suggest that the availability of this information improves merger and acquisitions efficiency. This paper was accepted by Mary Barth, accounting.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1993Common risk factors in the returns on stocks and bonds 1984Corporate financing and investment decisions when firms have information that investors do not have 2008Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches 1991Earnings Management During Import Relief Investigations 1961COUNTERSPECULATION, AUCTIONS, AND COMPETITIVE SEALED TENDERS 2001Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature 1983The market for corporate control

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