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INFORMATION ASYMMETRY, MANAGEMENT CONTROL, AND METHOD OF PAYMENT IN ACQUISITIONS
Author(s) -
Yook Ken C.,
Gangopadhyay Partha,
McCabe George M.
Publication year - 1999
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1999.tb00703.x
Subject(s) - information asymmetry , insider trading , payment , insider , business , control (management) , relation (database) , monetary economics , actuarial science , economics , finance , computer science , data mining , management , political science , law
We examine the information asymmetry hypothesis and the management control hypothesis by examining the relation between insider trading and insider holdings to the choice of payment method in acquisitions. Our results indicate that both insider ownership and insider trading are significantly related to payment method. These results provide additional evidence for both the management control theory and the asymmetric information theory in the choice of payment method in acquisitions. Furthermore, we find a significant relation between insider trading activity and the market reaction to the announcement of acquisitions. We conclude that information asymmetry exists in the takeover market and that it influences the payment method decision.