Due Diligence

• 成果类型: Article
• 署名作者: Daley, Brendan; Geelen, Thomas; Green, Brett
• 署名单位: Johns Hopkins University; Copenhagen Business School; Washington University (WUSTL); Copenhagen Business School
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13322
• 发表日期: 2024
• 页码: 2115-2161
• 关键词: Auctions; securities; ACQUIRERS; mergers; MARKET

摘要

We propose a model of due diligence and analyze its effect on prices, payoffs, and deal completion. In our model, if the seller accepts an offer, the winning bidder (or acquirer) can gather information and chooses when to complete the transaction. In equilibrium, the acquirer engages in too much due diligence. Our quantitative results suggest that the magnitude of the distortion is economically significant. Nevertheless, allowing for due diligence can improve both total surplus and the seller's payoff compared to a setting without due diligence. We use our framework to explore the timing of due diligence, bidder heterogeneity, and breakup fees.