The Certification Hypothesis of Fairness Opinions for Acquiring Firms
HHL Research Paper Series in Corporate Governance No. 4
24 Pages Posted: 23 Mar 2009 Last revised: 24 May 2012
Date Written: July 12, 2011
We study the certification role of fairness opinions in corporate transactions in a simple non-cooperative setting with asymmetric information and possibly misaligned managerial incentives, and discuss the effect of different regulatory scenarios. Specifically, we compare three settings: one in which no third-party fairness opinion is available, one in which the management is required to obtain a fairness opinion before any transaction, and one in which the management's decision to require a fairness opinion is voluntary. We compare shareholder value in each of the three scenarios and discuss implications for the optimal design of regulatory environments for fairness opinions.
Keywords: Fairness opinion, acquisition, management incentives
JEL Classification: G34, G38, K20
Suggested Citation: Suggested Citation