Abstract

This paper analyzes a target firm’s decision to voluntarily disclose information during a takeover event and the effect of such disclosures on the outcome of the takeover. In the model the acquirer may also run a media campaign. The model predicts that a voluntary disclosure of positive information by the target decreases the likelihood that the takeover succeeds. The empirical analysis confirms this prediction by showing that positive earnings forecasts by target firms during takeover events increase the probability of takeover failure. Overall, it is shown that information dissemination through voluntary disclosures by target firms is an important factor affecting takeover outcomes.

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