Essays on mergers and acquisitions
MetadataShow full item record
A key question in mergers and acquisitions (M&As) is whether the transactions are fair. A common practice is to ask a financial advisor to evaluate the fair value of a transaction and provide a fairness opinion. Using manually compiled data on a large sample over the period 1996-2011, I explore the decision to solicit fairness opinions by firms in M&As to identify the wealth effects associated with this choice. Inconsistent with prior studies, my results show that after controlling for endogeneity, the use of fairness opinions does not harm shareholders’ wealth. In contrast, I find evidence of a positive treatment effect for the use of fairness opinions on both the bidder and the target side. Overall, my results suggest that firms obtain fairness opinions for incremental information.