Fairness Opinions and Capital Markets: Evidence from Germany, Switzerland and Austria

In this paper, we provide the first empirical evidence of fairness opinions in Europe. Legal requirements concerning the use of fairness opinions in mergers and acquisitions are significantly different in Germany, Switzerland, and Austria. We examine the determinants of target fairness opinions in these various regulatory settings and, moreover, investigate the impact of such opinions on abnormal target returns. Whilst in Germany and Austria market participants do not deem fairness opinions important, they do create value for shareholders in Switzerland. Because conflicts of interest between target board and bidder are a main determinant of fairness opinions in Switzerland, we conclude that, when target management faces such conflict, external expert advice replaces the board’s opinion on the offer.