The Wealth Effects of Fairness Opinions in Takeovers

This paper explores the wealth effects associated with a bidder's decision to solicit a fairness opinion in a takeover transaction. Using a hand‐collected sample with bidders’ filing proxy statements, this paper finds that the use of fairness opinions does not negatively affect bidder shareholders’ wealth, a finding that contradicts prior studies’ findings. In addition, I find a positive wealth effect associated with bidder use of fairness opinions in the post‐Rule 2290 period. Collectively, these results are consistent with a fairness opinion being used by bidder management as a means to facilitate transactions rather than a mechanism to entrench management.