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Value of Information and Fairness Opinions in Takeovers


  • Mehmet Ekmekci
  • Nenad Kos


We analyze the value of information in the market for corporate control. The raider and the shareholders are privately and imperfectly informed about the post-takeover value of the firm. We show that public information provision reduces the dispersion of the shareholders’ beliefs resulting in a transfer of surplus from the raider to the shareholders. What is more, if the raider is privately informed all his private information is revealed through the price offer, hence he prefers not to acquire private information, provided that the shareholders do not engage in information acquisition. The target shareholders, on the other hand, have incentives to acquire information—solicit a fairness opinion—after the raider makes a price offer. However, when both parties have access to an information market, they both have incentives to acquire information. Keywords: takeovers, fairness opinion, tender offers, lemons problem, large shareholder. JEL Classification Numbers: D82, G34.

Suggested Citation

  • 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.
  • Handle: RePEc:igi:igierp:510

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    1. Masahiro Okuno-Fujiwara & Andrew Postlewaite & Kotaro Suzumura, 1990. "Strategic Information Revelation," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 25-47.
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    4. Alexander Dyck & Luigi Zingales, 2004. "Private Benefits of Control: An International Comparison," Journal of Finance, American Finance Association, vol. 59(2), pages 537-600, April.
    5. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Luis Rayo & Ilya Segal, 2010. "Optimal Information Disclosure," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 949-987.
    8. Kisgen, Darren J. & QJ Qian, Jun & Song, Weihong, 2009. "Are fairness opinions fair? The case of mergers and acquisitions," Journal of Financial Economics, Elsevier, vol. 91(2), pages 179-207, February.
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    10. Hirshleifer, David & Titman, Sheridan, 1990. "Share Tendering Strategies and the Success of Hostile Takeover Bids," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 295-324, April.
    11. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
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    Cited by:

    1. Dalkır, Elif, 2015. "Shareholder information and partial tender offers," Economics Letters, Elsevier, vol. 136(C), pages 64-66.

    More about this item

    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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