Lifeng Gu is Assistant Professor in Finance at The University of Hong Kong and Dirk Hackbarth is Professor of Finance at Boston University Questrom School of Business. This post is based on a recent paper by Professor Gu and Professor Hackbarth.
Takeovers and especially models predicting takeovers have been of interest to academics and practitioners. Our paper titled Does Transparency Increase Takeover Vulnerability? studies how transparency affects takeover probability and stock returns over 25 years of takeover data.
Economic intuition suggests that if higher firm-level transparency lowers uncertainty with respect to synergies and valuations of potential target firms, then it should facilitate takeovers. We argue therefore that a better information environment increases takeover vulnerability, such that it has an incrementally important impact on estimates of takeover likelihood, which is consistent with recent research. To the best of our knowledge, however, this is the first paper to examine empirically whether transparency affects takeover vulnerability and potentially stock returns too.
