The certification hypothesis of fairness opinions for acquiring firms

► We study the certification role of fairness opinions in corporate transactions. ► Our model, a simple non-cooperative setting, allows for asymmetric information and possibly misaligned managerial incentives. ► We analyze the effect of different regulatory scenarios on shareholder value and discuss...

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Bibliographic Details
Published in:International review of law and economics 2011-12, Vol.31 (4), p.240-248
Main Authors: La Mura, Pierfrancesco, Rapp, Marc Steffen, Schwetzler, Bernhard, Wilms, Andreas
Format: Article
Language:English
Subjects:
Acquisition
Acquisitions
Acquisitions & mergers
Asymmetric information
Business management
Fairness opinion
Fairness opinion Acquisition Management incentives
Justice
Management incentives
Opinions
Procurement
Regulation
Shareholders wealth
Studies
Transactional analysis
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Summary:► We study the certification role of fairness opinions in corporate transactions. ► Our model, a simple non-cooperative setting, allows for asymmetric information and possibly misaligned managerial incentives. ► We analyze the effect of different regulatory scenarios on shareholder value and discuss implications for optimal regulation. We study the certification role of fairness opinions in corporate transactions in a simple non-cooperative setting with asymmetric information and possibly misaligned managerial incentives, and discuss the effect of different regulatory scenarios. Specifically, we compare three settings: one in which no third-party fairness opinion is available, one in which the management is required to obtain a fairness opinion before any transaction, and one in which the management’s decision to require a fairness opinion is voluntary. We compare shareholder value in each of the three scenarios and discuss implications for the optimal design of regulatory environments for fairness opinions.
ISSN:0144-8188
1873-6394
DOI:10.1016/j.irle.2011.07.004