Target Firm-Specific Information and Acquisition Efficiency

Management Science, Forthcoming

51 Pages Posted: 5 Dec 2009 Last revised: 21 Sep 2015

Xiumin Martin

Washington University in Saint Louis - Olin School of Business

Ron Shalev

New York University (NYU) - Leonard N. Stern School of Business

Date Written: September 2, 2015

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 (Vickrey 1961; Milgrom 1989) 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.

Suggested Citation

Martin, Xiumin and Shalev, Ron, Target Firm-Specific Information and Acquisition Efficiency (September 2, 2015). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1518494 or http://dx.doi.org/10.2139/ssrn.1518494

Xiumin Martin

Washington University in Saint Louis - Olin School of Business ( email )

Saint Louis, MO 63130
United States

Ron Shalev (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States
2129980418 (Phone)

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