Table 3. Effect of time until completion...

Table 3.

Effect of time until completion on financial performance using accruals quality of target to proxy for information asymmetry

	(1)	(2)	(3)
ΔROA	One year	Two years	Five years
	Whole sample
Time until completion	0.000583	0.001468***	0.000487
Time until completion squared	−0.000006*	−0.000015***	−0.000006
Control variables and fixed effect	Y	Y	Y
Optimum time until completion (days)	52	50	38
U-test (p-value)	0.07	0.00	0.25
U-test-implication	Weak inverse U	Strong inverse U	Monotone/U
Observations	1,392	1,309	1,047
R²	0.116	0.135	0.181
Number of firms	900	832	659
	Opaque targets
Time until completion	0.001295	0.003473	0.008499**
Time until completion squared	−0.000042	−0.000063	−0.000356***
Control variables and fixed effect	Y	Y	Y
Optimum time until completion (days)	16	28	12
U-test (p-value)	0.3	0.18	0.02
U-test-implication	Monotone/U	Monotone/U	Strong inverse U
Observations	580	540	434
R²	0.125	0.117	0.291
Number of firms	462	427	338
	Transparent targets
Time until completion	0.000828	0.001069	0.000757
Time until completion squared	−0.000007	−0.000011*	−0.000008
Control variables and fixed effect	Y	Y	Y
Optimum time until completion (days)	63	47	46
U-test (p-value)	0.15	0.11	0.24
U-test-implication	Monotone/U	Monotone/U	Monotone/U
Observations	522	495	389
R²	0.339	0.300	0.570
Number of firms	397	372	294

	(1)	(2)	(3)
ΔROA	One year	Two years	Five years
	Whole sample
Time until completion	0.000583	0.001468***	0.000487
Time until completion squared	−0.000006*	−0.000015***	−0.000006
Control variables and fixed effect	Y	Y	Y
Optimum time until completion (days)	52	50	38
U-test (p-value)	0.07	0.00	0.25
U-test-implication	Weak inverse U	Strong inverse U	Monotone/U
Observations	1,392	1,309	1,047
R²	0.116	0.135	0.181
Number of firms	900	832	659
	Opaque targets
Time until completion	0.001295	0.003473	0.008499**
Time until completion squared	−0.000042	−0.000063	−0.000356***
Control variables and fixed effect	Y	Y	Y
Optimum time until completion (days)	16	28	12
U-test (p-value)	0.3	0.18	0.02
U-test-implication	Monotone/U	Monotone/U	Strong inverse U
Observations	580	540	434
R²	0.125	0.117	0.291
Number of firms	462	427	338
	Transparent targets
Time until completion	0.000828	0.001069	0.000757
Time until completion squared	−0.000007	−0.000011*	−0.000008
Control variables and fixed effect	Y	Y	Y
Optimum time until completion (days)	63	47	46
U-test (p-value)	0.15	0.11	0.24
U-test-implication	Monotone/U	Monotone/U	Monotone/U
Observations	522	495	389
R²	0.339	0.300	0.570
Number of firms	397	372	294

Notes:

Regressing our performance measure (change in return on assets) on time until deal completion and its squared term for different periods post-merger, the table is a combined test of the due diligence hypothesis and the overdue hypothesis. To test the role played by information asymmetry of the target, the sample is partitioned into opaque and transparent targets using the accrual quality of the target as a proxy for information asymmetry. Control variables include the national- and firm-level and deal-specific variables as explained in the appendix. Firm fixed effect is included in all models and the optimum time until deal completion and the results of the stringent test of quadratic relation, following Lind and Mehlum (2010) are also reported. Standard errors are corrected for heteroscedasticity and clustered at the firm level.

***p < 0.01,

**p < 0.05;

*p < 0.1

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