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INFORMATION ASYMMETRY AND WEALTH EFFECT OF CANADIAN CORPORATE ACQUISITIONS
Author(s) -
Calvet A. L.,
Lefoll J.
Publication year - 1987
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1987.tb01264.x
Subject(s) - information asymmetry , payment , business , value (mathematics) , cash , monetary economics , enterprise value , wealth effect , economics , microeconomics , accounting , financial economics , actuarial science , finance , monetary policy , machine learning , computer science
This study reports evidence on the wealth effects of bidders and targets involved in Canadian corporate acquisitions. It then examines whether wealth changes at the announcement time are consistent with the hypothesis that the payment method is a surrogate signal for bidder management's beliefs regarding the value of its firm. The findings support the value‐maximizing hypothesis and indicate a stronger performance for both bidders and targets in cash takeovers than in acquisitions involving an exchange of securities—in accordance with the existence of asymmetric information and the tax effect resulting from the payment method.