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Are fairness opinions fair? The case of mergers and acquisitions

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  • Kisgen, Darren J.
  • "QJ" Qian, Jun
  • Song, Weihong
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    Abstract

    Over the period 1994-2003, 80% of targets and 37% of acquirers obtain a third-party assessment of the fairness of a merger or acquisition. These fairness opinions do not affect deal outcomes when used by targets, but they affect deal outcomes when used by acquirers. The deal premium is lower in transactions if the acquirer obtains a fairness opinion, and is further reduced if multiple advisors provide an opinion. However, the acquirer's announcement-period return is 2.3% lower if the acquirer has a fairness opinion, especially if the acquirer pays a high premium, indicating that investors are skeptical of these transactions.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 91 (2009)
    Issue (Month): 2 (February)
    Pages: 179-207

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    Handle: RePEc:eee:jfinec:v:91:y:2009:i:2:p:179-207

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Fairness opinion Merger Conflict of interest Deal premium Announcement return;

    References

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    Citations

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    Cited by:
    1. Cai, Ye & Sevilir, Merih, 2012. "Board connections and M&A transactions," Journal of Financial Economics, Elsevier, vol. 103(2), pages 327-349.
    2. De Jong, Abe & Ongena, Steven & van der Poel, Marieke, 2010. "The international diversification of banks and the value of their cross-border M&A advice," CEPR Discussion Papers 7735, C.E.P.R. Discussion Papers.
    3. Matthew D. Cain & David J. Denis, 2010. "Do Fairness Opinion Valuations Contain Useful Information?," Purdue University Economics Working Papers 1244, Purdue University, Department of Economics.
    4. Mehmet Ekmekci & Nenad Kos, 2014. "Value of Information and Fairness Opinions in Takeovers," Working Papers 510, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

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