Changes

==Key/Cross-Group Papers==

@article{dierkens1991information,

*We measure the intensity of public announcements made about the firm by the number of public announcements published in the Wall Street Journal The measure of IA, DNBan, is a dummy variable set equal to 1 when the firm has 16 or fewer announcements listed in the WSJI for the year prior to the equity issue announcement.

*The volume of trading in the shares of the firm is another potential measure of IA often suggested in the literature... We use RTRADE, the ratio of number of shares traded during the last year ending before the equity issue announcement, divided by the number of shares outstanding at the end of the fiscal year before the equity issue announcement. We choose to use intensity of trading, not total trading, because we want to exclude the impact of the size of the firm, checked independently. Two opposite predictions about trading and the IA can be represented in the framework intrbduced earlier. If the level of information asymmetry determines the volume (and intensity) of trading, trading will correlate positively with the information asymmetry through time. On the other hand, trading could release information and decrease the IA of the firm. Since the literature on trading is not sure of the direction of its influence, we will use trading without any a priori sign attached to it.

@article{clarke2001information,

*Analyst's Forecast Measures (data: First Call summary tape):

**Forecast Error (Analysts over and under react): <math>ForecastError=\frac{|ACT_t-EST_t|}{|Act_t|}</math>

**Number of estimates (Analysts attracted to firms with IA)

*Investment opportunity set:

*Microstructure:

**Bid Ask Spread (calculated from a model)

@article{moeller2007diversity,

*Uses Tobin's Q, but not as an IA measure.

*In particular, we find that an increase in breadth of ownership leads to significantly higher returns for cash offers for public companies. Such a result could be understood if breadth-of-ownership proxies for information asymmetry since, in the presence of information asymmetry, a cash offer is good news about the value of the bidder’s common stock.

*When idiosyncratic volatility is added to the regression, dispersion of analyst forecasts is no longer significant... Finally, in regression (4) we add breadth of ownership and the mutual fund holding variable to regression (1). We find that breadth of ownership is not significant. It follows that idiosyncratic volatility dominates our proxies for diversity of opinion.

@article{krishnaswami1999information,

*Following Dierkens (1991), we use the volatility in abnormal returns around earnings announcements as the fourth measure of information asymmetry about each firm.

*Finally, following Bhagat et al. (1985), Blackwell et al. (1990), and Krishnaswami et al. (1999), we use the residual volatility in daily stock returns as the fifth proxy for information asymmetry. The residual standard deviation is the dispersion in the market-adjusted daily stock returns in the year preceding the announcement of the spin-off.

@article{frankel2004characteristics,

*To measure voluntary disclosure and press coverage for a firm, we search the “all news” category of the DJNR to identify the number of company-specific news events. For each firm-year we examine CRSP for availability of returns data between January 1, 1980 and December 29, 2000. We then search DJNR for all news articles on that company over the subinterval containing CRSP returns for that firm-year.

*We compute a net purchase ratio (NPR) similar to that of Lakonishok and Lee (2001) to measure insider trading activities in a given firm-month. NPR is computed by dividing the net purchases by managers in a given month by the total number of manager transactions over the same period. Net purchases are computed by subtracting the number of sale transactions from the number of purchase transactions in a given month.

@article{thomas2002firm,

*As the primary measure of forecast accuracy, I use ERROR, which is the absolute difference between actual earnings and the median forecast deflated by the stock price five days before the earnings announcement date. Firms with larger differences in information asymmetry between managers and outsiders regarding firm earnings are expected to have larger forecast errors. DISPERSION is the standard deviation of analysts’foreca sts deflated by the stock price five days before the earnings announcement date. This variable is a measure of disagreement among analysts. Disagreement could result from a lack of available information about a firm. Thus, greater disagreement among analysts’foreca sts could imply larger information problems.

*As in Alford and Berger (1999), I include a measure of stock return volatility (VOLATILITY), calculated as the standard deviation of the market model residuals over the period from 210 to 11 days before the earnings announcement date. The volatility of stock prices proxies for the amount of pricerelevant information about a firm that arrives daily to the market Analysts might face more difficulty in forecasting earnings for firms with a lot of potential growth options relative to firms whose values consist mainly of assets-inplace. Thus, I also include in the analysis the ratio of R&D expense to sales (RDSALES) and the ratio of intangible assets to total assets at the previous fiscal year end (INTGTA).

@article{tetlock2010does,

**Analyst coverage for each stock is the number of analysts with yearly earnings forecasts for that stock in the previous calendar month.

**analyst forecast dispersion (Disperi t ) is the standard deviation of the one-year earnings per share forecasts in the previous calendar month divided by the contemporaneous stock price

==Analysts Forecasts==

@article{officer2007price,

*Matches on method of payment...

*The last independent variable in Table 7 is the coefficient of variation of analysts’ earning forecasts, which is a direct measure of information asymmetry that has been employed in the literature (Officer, 2004; Barry and Brown, 1985). I measure the coefficient of variation of earnings forecasts made closest but prior to the subsidiary sale, where all earnings forecasts are for the parent firm and for the quarter following the one in which the subsidiary sale is announced. This coefficient of variation therefore proxies for the extent of pre-sale differential information about the subsidiary’s parent.21 While the coefficient on the earnings forecast coefficient of variation in Table 7 is not statistically significantly different from zero (p-value ¼ 0.12), it does have the sign that would be expected if it were capturing the effect of information asymmetry—acquisition discounts are greater when information asymmetry is higher—and the variable does have a significantly negative coefficient in a univariate regression (not tabulated).

@article{lee1992management,

I examine four proxies of asymmetric information:

# analyst following

# firm size

# market to book value ratio.

Reports, the Institutional Brokers Estimate System (I/B/E/S Inc.) and Nelson's Directory of

Investment Research.)

@article{affleck2002earnings,

*We then calculated the standardized absolute forecast error (SAFEi,y ) as follows: SAFEi,y =|(CYFi,y - AEPSi,y )/AEPSi,y

*We calculated the relative dispersion of analysts’ forecasts for the first consensus annual forecast issued after the year y-1 10-K report filing date using the standard deviation of analysts’ forecasts as reported by I/B/E/S: DAFi,y = (Standard Deviation of Analysts’ Forecasti,y )/|CYFi,y |.

@article{atiase1994trading,

**<math>DISP. = \frac{Standard deviation of analysts’ forecasts}{|Mean forecast|}</math>

**<math>RANGEi = \frac{Highest forecast - Lowest forecast}{|Mean forecast|}</math>

@article{lobo1997relation,

==Stock return/volume measures==

@article{utama1997institutional,

*As in Bamber and Cheon (1995), we estimate the relative unexpected volume in the announcement period as the ratio of the announcement-period trading volume to the expected volume, which is the median non-announcement trading volume.

*Hence, we identify institutional ownership (INST) as the percentage of a firm's outstanding common shares held by institutional investors that is reported in the available Compact Disclosure disk dated on or after the month of the earnings announcement date.

==Accounting Measures==

===Development Stage (Sales < $500m) and R&D expenditure===

@article{officer2009target,

===Tobin's Q, Sales Growth===

@article{martin1996method,

===Q (B2M), Size, Mgr-holdings, Feasibility of Cash===

@article{emery1999expected,

===R&D===

@article{aboody2000information,

Measures:

*R&D expenditure (No vs. some, and low vs. high)

===Other===

@article{capron2007acquisitions,

===Cash vs. Stock===

@article{chang1998takeovers,

*When firms offer stock to acquire publicly traded targets with a large number of shareholders, they can suffer from the asymmetric information problem of Myers and Majluf (1984). They demonstrate that issuing equity to the public reduces a firm’s stock price when managers have superior information. In the context of their model, bidding firm managers offer stock when they believe the firm is overvalued. Hence, the market reaction to the takeover proposal will be negative.

*On the other hand, when firms offer stock to acquire privately held targets with a small number of shareholders, the problem can be mitigated through the disclosure of bidding firm managers’ private information to the target shareholders. Further, the target shareholders have an incentive to assess the bidding firm’s prospect carefully because they will end up holding a substantial amount of the bidding firm’s stock after the merger. Thus, their willingness to hold a large block of shares conveys to the market favorable information about the bidding firm, resulting in a positive stock price reaction to the merger proposal.

@article{eckbo1990asymmetric,

Measures:

*Medium of exchange - cash vs. stock, stock mitigates IA problems.

@article{amihud1990corporate,

Measures:

*The method of payment, reported in Mergers and Acquisitions and confirmed against the Wall Street Journal's announcement, is represented by the variable PA Y: PA Y = 0 when the target firm was acquired for cash and/or notes, and PA Y = 1 when the acquiring firm exchanged its stock for that of the acquired firm.

@article{brown1991mode,

Quotes:

*We demonstrate that bidders with unfavorable private information about their equity value choose offers containing some stock to avoid the capital gains tax consequences of cash offers.

@article{fuller2002returns,

*Mostly considers cash vs. stock

*To the extent information asymmetry regarding the value of the acquirer is important in bids, we would expect to see patterns in the bids made close together in time, since the information asymmetry that exists at one point in time and its impact on bidders presumably would impact nearby bids in similar ways. From our original sample, we identify 1,115 paired acquisitions where the bidder acquired two targets within a three-month period. We expect acquirers to use the same method of payment for these transactions if the target and bid characteristics are similar. That is, if both targets are private firms, the bidder would use stock for both targets, all else held constant.

@article{carow2004early,

*Related Acquisition

*Acquirer's Experience

@article{eckbo2000gains,

Measures:

*Uses payment method

@article{yook2003larger,

*Uses cash/stock

*Examines rating changes to acquisitions

@article{calvet1987information,

===Distance===

@article{agarwal2010distance,

*Not an acquisition paper

*Distance matters in lending in mitigating IA (seminal paper?)

@article{basu2011distance,

*average daily transaction-based quoted bid-ask spreads and quoted depths - Amihud Illiquidity (Amihud (2002))

*trading volume

**where N represents the number of days in the estimation period, Ret is the daily stock return, and Vol is the total number of shares traded during the day.

*Quoted Half Spreads: One half of absolute difference between best bid and ask price