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.

Open Access

This is an open access article distributed under the CC BY-NC license.