Given the recent findings in the literature that idiosyncratic volatility reflects stock price informativeness, we analyze the impact of idiosyncratic volatility on many acquisition parameters. We find that idiosyncratic volatility is positively related to acquisition premium; the relationship is more significant in deals that occurred in information-poor economies where acquirers have difficulty gathering information about the targets. These deals typically involve bidders from emerging markets and those that have less experience in the target country. Idiosyncratic volatility is also positively related to acquisition completion rate, the likelihood of the bidder acquiring majority control, but is negatively related to takeover probability.

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Keywords Emerging markets, Idiosyncratic volatility, Mergers and acquisitions
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Journal Emerging Markets Review
Zhu, P. (PengCheng), Jog, V, & Otchere, I. (2014). Idiosyncratic volatility and mergers and acquisitions in emerging markets. Emerging Markets Review, 19, 18–48. doi:10.1016/j.ememar.2014.04.001