The Information Content of Target Price Forecasts: Evidence from Mergers and Acquisitions

Accounting

Speaker:Tuan Ho, University of Bristol
Date: Wednesday 21 February 2018
Time: 14:30 - 16:00
Location: Kolade Teaching Room, Building One

Further details

Abstract

This paper investigates the information role of analysts’ forecasts of target prices in the context of mergers and acquisitions. We show that firms with high 12-month ahead target prices relative to current stock prices are more likely to become takeover targets in the subsequent one to two years. We also find that target firms with relatively high pre-merger announcement target prices are more likely to receive a higher offer premium and deals with higher target price adjusted offer premium are more likely to be completed. Our results suggest that analysts convey through their target prices valuable information that can be useful for market participants in the context of M&A.