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Information asymmetry and bidders’ gains

Draper, Paul and Paudyal, Krishna (2008) Information asymmetry and bidders’ gains. Journal of Business Finance and Accounting, 35 (3-4). pp. 376-405. ISSN 0306-686X

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Abstract

Undervalued firms with high information asymmetry may announce takeover bids to attract the attention of investors with a view to increasing the share price through revaluation. Announcement period returns to such bidders should include both revaluation and synergy gains although the revaluation gains should be confined to early bids and decline with the number of bids announced within a reasonable period. Our results offer strong support to these predictions. Undervalued firms with high pre-bid information asymmetry gain the most from early bids and the gains decline with the number of bids announced. These findings are robust to methods of payment, relative size of deals, target status, relatedness of businesses, domicile of target, M&A activities and alternative measures of information asymmetry, and confirm that gains from early bids include revaluation as well as synergy gains, especially in the cases of undervalued firms with high information asymmetry.

Item type: Article
ID code: 30159
Keywords: revaluation gains, acquisitions, information asymmetry, synergies , Finance
Subjects: Social Sciences > Finance
Department: Strathclyde Business School > Accounting and Finance
Related URLs:
    Depositing user: Pure Administrator
    Date Deposited: 29 Mar 2011 15:28
    Last modified: 11 Jan 2013 20:46
    URI: http://strathprints.strath.ac.uk/id/eprint/30159

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