Abnormal Returns and Asymmetric Information Surrounding Strategic and Financial Acquisitions

Accounting & Finance (Forthcoming)

Posted: 23 Aug 2019 Last revised: 29 Aug 2019

See all articles by Sarah Osborne

Sarah Osborne

Queensland University of Technology

Date Written: July 25, 2018

Abstract

Using United States takeover bids, we investigate the importance of information asymmetry in self-selection when evaluating the abnormal returns of financial versus strategic takeover targets during a period of possible informed trade. Sample selection bias due to differences in financial versus strategic takeover bids information environments is controlled for using Heckman’s (1979) model. Results evidence that takeover announcements are not randomised indicative of timed announcements, and further that private equity firms exhibit lower price impact post-announcement. We conclude that the long-term financial motive of private equity takeovers, coupled with higher private information pre-announcement, leads to lower abnormal returns post-announcement.

Keywords: Private Equity, Informed Trade, Asymmetric Information, Acquisition Types

JEL Classification: G14, G32, G34

Suggested Citation

Osborne, Sarah, Abnormal Returns and Asymmetric Information Surrounding Strategic and Financial Acquisitions (July 25, 2018). Accounting & Finance (Forthcoming). Available at SSRN: https://ssrn.com/abstract=3440994

Sarah Osborne (Contact Author)

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000
Australia

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