Does the Use of Fairness Opinions Impair the Acquirers' Abnormal Returns? The Litigation Risk Effect

Lucy Hua-Jing Chen ； Heibatollah Sami

《Advances in Investment Analysis and Portfolio Management》 4期 (2010/08) Pp. 81-112

https://doi.org/10.6291/AIAPM.2010.04.04

並列摘要

We examine the litigation risk effect of the acquirers' use of fairness opinions on acquirers' short-term market performance. Our paper is the first to examine how the different level of litigation risk affects the relation between acquirers' use of fairness opinions and acquirers' abnormal returns around acquisition announcements. Our results show that acquirers that purchase fairness opinions underperform those that do not over various event windows around acquisition announcements. More importantly, the underperformance is more pronounced for acquirers that operate in high litigation risk industries. In addition, acquirers in high litigation risk industries are more likely to purchase fairness opinions from investment bankers than acquirers in low litigation risk industries. Overall, our results are consistent with our litigation risk effect hypothesis that acquirers purchase fairness opinions to reduce their potential litigation risk. Our paper raises the concern over the value of fairness opinions in mergers and acquisitions.

並列關鍵字

Fairness Opinion ； Acquirers' Abnormal Returns ； Litigation Risk

參考文獻

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