Do Fairness Opinion Valuations Contain Useful Information?
AbstractWe analyze target firm valuations disclosed in the fairness opinions of negotiated mergers between 1998 and 2005. On average, acquirer advisors exhibit a greater degree of valuation optimism than do target advisors. Top-tier advisors produce more accurate valuations than lower-tier advisors, but valuation accuracy is unrelated to the contingency structure of advisory fees. The stock price reactions to merger announcements and to the public disclosure of fairness opinions are positively related to the difference between target firm valuations contained in the fairness opinion and the merger offer price. We conclude that fairness opinions contain information not previously available to market participants.
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Bibliographic InfoPaper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1244.
Length: 54 pages
Date of creation: Jul 2010
Date of revision:
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