Eventi del

12 2012 12:30 - 13:30
Via Roentgen 1, II floor, room 2 e4 sr 03

How much to pay, and how, for opacity? Negotiating premiums and methods of payment in M&A

Carlo Chiarella, Università Bocconi

Abstract :
We use a sample of bids by and for U.S. publicly listed firms over the period 1979-2011 to focus on the dynamics of the choice of the method of payment and bid premium for different degrees of information asymmetry of bidder and target firms by conditioning cross-sectionally on the basis of firms' trading properties, that we assume representative of individual firm opacity. We study the joint effect of target’s and bidder’s opacity on the simultaneous determination of the method of payment and the bid premium. Bidders’ preference for stock is increasing in the opacity of the target for bids of substantial materiality. Moreover, premiums are higher for cash bids and increase with the opacity of the target. For stock bids, premiums are also negatively related to the opacity of the bidder. These effects eventually concur to determine the difference in the anticipated premiums under respectively cash and stock payment regimes which we find positively associated to the use of stock.