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Limited Information and the Sustainability of Unlisted‐Target Acquirers' Returns

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  • Manapol Ekkayokkaya
  • Phil Holmes
  • Krishna Paudyal

Abstract

Relaxed disclosure requirements of unlisted firms, as compared to publicly listed companies, lead to limited quality and quantity of information at bid announcements, causing difficulty in valuing gains from mergers. This raises the question: are the frequently reported superior announcement‐period gains to unlisted‐target acquirers sustainable in the long run? Our results for the UK show that unlisted‐target acquirers gain on announcement, but suffer a substantial loss in the long run. This reversal in fortune of unlisted‐target acquirers is in sharp contrast to the performance of listed‐target acquirers in the UK. Therefore, short‐run gains for unlisted‐target acquirers may result from investors’ excessive optimism when faced with limited and biased information.

Suggested Citation

  • Manapol Ekkayokkaya & Phil Holmes & Krishna Paudyal, 2009. "Limited Information and the Sustainability of Unlisted‐Target Acquirers' Returns," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(9‐10), pages 1201-1227, November.
    • Handle: RePEc:bla:jbfnac:v:36:y:2009:i:9-10:p:1201-1227
    DOI: 10.1111/j.1468-5957.2009.02166.x
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