Idiosyncratic volatility and mergers and acquisitions in emerging markets |
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Institution: | 1. School of Business Administration, University of San Diego, 5998 Alcalá Park, San Diego, CA 92110, USA;2. Sprott School of Business, Carleton University, 1125 Colonel By Dr, Ottawa, Ontario K1S 5B6, Canada;1. School of Management & Economics, Beijing Institute of Technology, 5 South Zhongguancun Street, Beijing 100081, China;2. Johns Hopkins University, 100 N. Charles Street, Baltimore, MD 21201;3. Fordham University, 113 W 60th St., New York, NY 10023;4. The Peter J. Tobin College of Business, St. John''s University, Queens, NY 11439;1. Department of Finance and Insurance, Miller College of Business, Ball State University, Whitinger Business Building, Rm. 301, Muncie, IN, 47306, United States;2. Department of Finance, University of South Florida, 4202 East Fowler Avenue, BSN 3403, Tampa, FL, 33620-5500, United States |
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Abstract: | Given the recent findings in the literature that idiosyncratic volatility reflects stock price informativeness, we analyze the impact of idiosyncratic volatility on many acquisition parameters. We find that idiosyncratic volatility is positively related to acquisition premium; the relationship is more significant in deals that occurred in information-poor economies where acquirers have difficulty gathering information about the targets. These deals typically involve bidders from emerging markets and those that have less experience in the target country. Idiosyncratic volatility is also positively related to acquisition completion rate, the likelihood of the bidder acquiring majority control, but is negatively related to takeover probability. |
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