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Testing for Asymmetric Information Effects in Failed Mergers

Author

Listed:
  • Peter Holl
  • Xeni Dassiou
  • Dimitris Kyriazis

Abstract

In this paper we report the results of an empirical investigation based on a sample of 105 failed merger bids that occurred in the UK in the 1980's. We find that target firms report large, significant, positive gains after the bid while bidder firms report large, significant, negative gains. We also find that these returns are affected by the extent to which the bidder and target firms are related. In related bids target returns are significantly lower and bidder returns are significantly more negative than in unrelated bids. We conclude that these results are consistent with an information based explanation of merger activity.

Suggested Citation

  • Peter Holl & Xeni Dassiou & Dimitris Kyriazis, 1997. "Testing for Asymmetric Information Effects in Failed Mergers," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(2), pages 155-172.
    • Handle: RePEc:taf:ijecbs:v:4:y:1997:i:2:p:155-172
    DOI: 10.1080/758516225
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    Citations

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    Cited by:

    1. Hankir, Yassin & Rauch, Christian & Umber, Marc P., 2011. "Bank M&A: A market power story?," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2341-2354, September.
    2. Mittal, Amit & Garg, Ajay Kumar, 2017. "Why do acquirers prefer M&A? Evidence from Banks in India," MPRA Paper 85354, University Library of Munich, Germany.
    3. Abhirup Chakrabarti & Will Mitchell, 2016. "The role of geographic distance in completing related acquisitions: Evidence from U.S. chemical manufacturers," Strategic Management Journal, Wiley Blackwell, vol. 37(4), pages 673-694, April.
    4. Peter Holl & Dimitis Kyriaziz, 1996. "The Determinants of Outcome in UK Take-over Bids," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 3(2), pages 165-184.
    5. George Marian AEVOAE, 2018. "How Can We Create Value From Enterprise Concentrations? A Meta-Analysis Of The Scientific Literature On M&As In The European Union," EURINT, Centre for European Studies, Alexandru Ioan Cuza University, vol. 5, pages 63-87.
    6. Mittal, Amit & Garg, Ajay Kumar, 2017. "Private information implications for acquirers and targets in horizontal mergers," MPRA Paper 85355, University Library of Munich, Germany.

    More about this item

    Keywords

    Failed mergers; Asymmetric information; Event study; JEL classification: D82; G34;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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