Premium
Does asymmetric information affect the premium in mergers and acquisitions?
Author(s) -
Dionne Georges,
La Haye Mélissa,
Bergerès AnneSophie
Publication year - 2015
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12159
Subject(s) - common value auction , mergers and acquisitions , information asymmetry , affect (linguistics) , value (mathematics) , private information retrieval , test (biology) , business , microeconomics , econometrics , economics , monetary economics , finance , psychology , statistics , mathematics , paleontology , communication , biology
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