Targets' Earnings Quality and Bidders' Takeover Decisions

• DOI: 10.2139/ssrn.1345581
• Publication Date: 2011-12-28T13:06:01Z
• Authors: Kartik Raman; Lakshmanan Shivak...; Ane Miren Tamayo
• Keywords: Earnings quality

This study examines how takeover decisions are influenced by the quality of information in target firms' earnings. We show that bidders prefer negotiated takeovers deals involving targets with poor earnings quality. Moreover, and premiums negatively related takeovers, suggesting obtain valuable private through negotiations. also find share risk shareholders paying more equity for These findings driven primarily asymmetric component (as opposed to symmetric component), observed mainly inter-industry where concerns greater, rather than intra-industry takeovers. conclude targets' affects bidders' decisions, particularly cases large between bidders.