Signaling under Threat: Evidence of Voluntary Disclosure in Contested Takeovers Forthcoming at Journal of Accounting, Auditing & Finance
42 Pages Posted: 28 Sep 2021
Date Written: September 27, 2021
We investigate voluntary disclosure strategies in contested takeovers and the associated economic consequences. Using a difference-in-differences research design and propensity score matching, we find that, relative to friendly takeovers, target management in contested takeovers provides more earnings guidance and conveys more good news during the takeover. Moreover, voluntary disclosure helps contested targets negotiate a better offer and the results are stronger for targets with more information asymmetry. Collectively, targets adopt voluntary disclosure and alter their strategies under the threat of contested takeover to enhance their bargaining power. Voluntary disclosure by contested targets serves as a negotiation tactic that potentially benefits target shareholders.
Keywords: voluntary disclosure; contested takeover; takeover consequences
JEL Classification: M10, M41
Suggested Citation: Suggested Citation