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Asymmetric information and target firm returns

Author

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  • Ettore Croci
  • Dimitris Petmezas
  • Nickolaos Travlos

Abstract

This article examines the relationship between asymmetric information and target firm returns in mergers and acquisitions (M&As). We argue that if managers possess favourable (unfavourable) asymmetric information, they will offer, ceteris paribus , a high (low) premium, affecting target firm returns accordingly. We propose several proxies of asymmetric information. The empirical evidence strongly supports our hypothesis as we find that target firm returns are significantly negatively related to asymmetric information regarding synergy gains. Our results are robust after controlling for several target and deal characteristics.

Suggested Citation

  • Ettore Croci & Dimitris Petmezas & Nickolaos Travlos, 2012. "Asymmetric information and target firm returns," The European Journal of Finance, Taylor & Francis Journals, vol. 18(7), pages 639-661, June.
    • Handle: RePEc:taf:eurjfi:v:18:y:2012:i:7:p:639-661
    DOI: 10.1080/1351847X.2011.599850
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    Cited by:

    1. Florent Venayre, 2015. "L'efficacité du pouvoir ultramarin d'injonction structurelle en question," GREDEG Working Papers 2015-50, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    2. Anagnostopoulou, Seraina C. & Tsekrekos, Andrianos E., 2013. "Do firms that wish to be acquired manage their earnings? Evidence from major European countries," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 57-68.
    3. 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.

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