Information Asymmetry at Merge and Acquisition - An Investigation on Firms in the Electric Industry

Authors

Chi-Yun Hua ⁰, Wen-Chih LEE, Yao Min-Li, Chin Wei-Ming

Corresponding author

Chi-Yun Hua

DOI

https://doi.org/10.2991/jcis.2006.48How to use a DOI?

Keywords

Merge & Acquisition Announcement, Market Microstructure, VAR Model, Bid-Ask Spread, Information Asymmetry

Abstract

The prior studies are focus on the association between merge and acquisition (M&A) announcement and stockholders’ wealth. There are few studies examining the change in the level of information asymmetry at M&A announcement. Our study, therefore, goes to fill out the aspect. This paper empirically investigates the change in asymmetric information at M&A announcement with a model proposed by Hasbrouck (1991b) and Brooks (1996). The model uses stock price, bid-ask quote, and trading volume via VAR model to derive a new proxy (Rw2　) of price variance for the level of asymmetric information change among investors. The sample includes 30 firms with the M&A events in the electronic industry as listed in the Taiwan primary market. The findings indicate that M&A announcements, based on this study, has information contents but do not effectively reduce the level of asymmetry.

Copyright

© The authors. This article is distributed under the terms of the Creative Commons Attribution License 4.0, which permits non-commercial use, distribution and reproduction in any medium, provided the original work is properly cited. See for details: https://creativecommons.org/licenses/by-nc/4.0/

Open Access | Under Creative Commons license CC BY-NC 4.0