RFS Advance Access originally published online on September 21, 2007
Review of Financial Studies 2007 20(6):2047-2078; doi:10.1093/rfs/hhm040
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How Do Diversity of Opinion and Information Asymmetry Affect Acquirer Returns?
University of Pittsburgh
University of Pittsburgh
The Ohio State University, NBER, and ECGI
Address correspondence to René M. Stulz, The Ohio State University, Fisher School of Business, Columbus, OH 43210,or e-mail: Stulz{at}cob.ohio-state.edu
JEL: G31, G32, G34
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Abstract |
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We examine the theoretical predictions that link acquirer returns to diversity of opinion and information asymmetry. Theory suggests that acquirer abnormal returns should be negatively related to information asymmetry and diversity-of-opinion proxies for equity offers but not cash offers. We find that this is the case and that, more strikingly, there is no difference in abnormal returns between cash offers for public firms, equity offers for public firms, and equity offers for private firms after controlling for one of these proxies, idiosyncratic volatility.
We are grateful to I/B/E/S International Inc. and First Call for providing the analyst forecasts data. We thank the seminar participants at the Ohio State University, Princeton University, Texas Tech University, University of Kentucky, University of North Carolina, University of South Carolina, University of Texas-Arlington, University of Utrecht, University of Wisconsin-Milwaukee, Wake Forest University, an anonymous referee, Patrick Bolton, Eugene Fama, Bing Han, Harrison Hong, Kose John, Andrew Karolyi, Robert McDonald, Carrie Pan, Ailsa Roell, Greg Sommers, Jérôme Taillard, Wei Xiong, and Chad Zutter for helpful comments and suggestions. Tom Boulton and Carrie Pan provided valuable research assistance. Part of this research was conducted while Moeller was at Wake Forest University.