Synergy Disclosures in Mergers and Acquisitions
46 Pages Posted: 17 Mar 2010 Last revised: 7 May 2013
Date Written: May 6, 2013
We examine bidding firms’ motives for disclosing a synergy forecast when announcing a merger or acquisition. Our sample consists of 1,990 M&A deals, of which 345 announce synergy estimates. Our results suggest that synergy disclosures serve to obtain a more favorable market reception for deals that would otherwise induce highly negative bidder announcement returns. After controlling for the endogeneity of the disclosure decision, synergy forecast disclosures result in approximately 5% higher bidder stock returns. The main deterrents of disclosing synergy values are lack of precise information on synergy values available to bidding-firm management, and shareholder litigation risk.
Keywords: Mergers and Acquisitions, Synergies, Voluntary disclosure, Information asymmetry
JEL Classification: G34, M41
Suggested Citation: Suggested Citation