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The Certification Hypothesis of Fairness Opinions for Acquiring Firms

International Review of Law and Economics, Vol. 31, No. 4, pp. 240-248

HHL Research Paper Series in Corporate Governance No. 4

24 Pages Posted: 23 Mar 2009 Last revised: 24 May 2012

Pierfrancesco La Mura

Handelshochschule Leipzig

Marc Steffen Rapp

University of Marburg - School of Business & Economics; Marburg Centre for Institutional Economics (MACIE); Center for Corporate Governance, Copenhagen Business School

Bernhard Schwetzler

HHL Leipzig Graduate School of Management - Department of Finance

Andreas Wilms

Handelshochschule Leipzig (HHL)

Date Written: July 12, 2011

Abstract

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

La Mura, Pierfrancesco and Rapp, Marc Steffen and Schwetzler, Bernhard and Wilms, Andreas, The Certification Hypothesis of Fairness Opinions for Acquiring Firms (July 12, 2011). International Review of Law and Economics, Vol. 31, No. 4, pp. 240-248; HHL Research Paper Series in Corporate Governance No. 4. Available at SSRN: https://ssrn.com/abstract=1366304 or http://dx.doi.org/10.2139/ssrn.1366304

Pierfrancesco La Mura

Handelshochschule Leipzig ( email )

Jahnallee 59
Leipzig, D-04109
Germany

Marc Steffen Rapp (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

Center for Corporate Governance, Copenhagen Business School ( email )

Porcelænshaven 24A, 3rd floor
Copenhagen
Denmark

Bernhard Schwetzler

HHL Leipzig Graduate School of Management - Department of Finance ( email )

Jahnallee 59
D-04109 Leipzig
Germany
+49-341-9851-685 (Phone)
+49-341-9851-689 (Fax)

Andreas Wilms

Handelshochschule Leipzig (HHL) ( email )

Jahnallee 59
Leipzig, D-04109
Germany

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