The Information Provision in the Corporate Acquisition Process: Why Target Firms Obtain Multiple Fairness Opinions

The Accounting Review, Vol. 95 (1), pp. 287–310, 2020

63 Pages Posted: 2 Apr 2019 Last revised: 24 May 2021

Date Written: March 9, 2019

Abstract

Using a hand-collected dataset for takeovers from 1996 to 2013, I examine why some target firms obtain a second fairness opinion and the associated wealth effects of doing so. I find that multiple opinions are more likely to be used in deals in which management/investment bank conflicts of interest are high -- e.g., buyouts and stapled financing deals. In addition, the use of a second opinion has a significantly positive impact on target shareholders’ wealth in these two types of deals. Fairness opinion valuation predominantly relies on accounting data and the benefit of seeking a second opinion increases with a firm’s earnings quality. Collectively, the results suggest that a second opinion is used to facilitate transactions.

Keywords: Mergers and acquisitions (M&As), Fairness opinions, Target returns, Buyouts, Stapled financing, Earnings quality

JEL Classification: G34, G24, J33

Suggested Citation

Liu, Tingting, The Information Provision in the Corporate Acquisition Process: Why Target Firms Obtain Multiple Fairness Opinions (March 9, 2019). The Accounting Review, Vol. 95 (1), pp. 287–310, 2020, Available at SSRN: https://ssrn.com/abstract=3349768 or http://dx.doi.org/10.2139/ssrn.3349768

Tingting Liu (Contact Author)

Iowa State University ( email )

2330 Gerdin Business Building
Ames, IA 50011
United States

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