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Does asymmetric information affect the premium in mergers and acquisitions?

Author

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  • Georges Dionne
  • Mélissa La Haye
  • Anne-Sophie Bergerès

Abstract

We test the influence of information asymmetry on the premium paid for an acquisition. We analyze mergers and acquisitions as English auctions. The theory of dynamic auctions with private and common value predicts that more informed bidders may pay a lower price. We test that prediction with a sample of 1,026 acquisitions in the United States between 1990 and 2007. We assume that blockholders of the target's shares are better informed than other bidders because they possess privileged information on the target. Our empirical results show that blockholders pay a much lower premium than do other buyers

Suggested Citation

  • Georges Dionne & Mélissa La Haye & Anne-Sophie Bergerès, 2015. "Does asymmetric information affect the premium in mergers and acquisitions?," Canadian Journal of Economics, Canadian Economics Association, vol. 48(3), pages 819-852, August.
  • Handle: RePEc:cje:issued:v:48:y:2015:i:3:p:819-852
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    Cited by:

    1. Glenn Boyle & Gerald Ward, 2016. "Do Better Informed Investors Always Do Better?," Working Papers in Economics 16/29, University of Canterbury, Department of Economics and Finance.
    2. repec:bla:jfnres:v:40:y:2017:i:1:p:33-54 is not listed on IDEAS
    3. Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013. "A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance," Research in Transportation Economics, Elsevier, vol. 43(1), pages 85-97.
    4. Pierre Picard & Kili Wang, 2015. "INSURANCE FRAUD THROUGH COLLUSION BETWEEN POLICYHOLDERS AND CAR DEALERS: THEORY AND EMPIRICAL EVIDENCE Pierre PICARD," Working Papers hal-01140590, HAL.
    5. Glenn Boyle & Gerald Ward, 2018. "Do Better Informed Investors Always Do Better? A Buyback Puzzle," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2137-2157, October.
    6. repec:eee:finlet:v:26:y:2018:i:c:p:71-80 is not listed on IDEAS
    7. Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.

    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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