The Information Content of Target Price Forecasts: Evidence from Mergers and Acquisitions

Tuan Ho, Ruby Brownen-Trinh, Fangming Xu*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

2 Citations (Scopus)
76 Downloads (Pure)


This paper investigates the informativeness and value relevance of analyst target prices in the context of mergers and acquisitions (M&A). Our results indicate that firms with high 12-month ahead target prices relative to current stock prices are more likely to become a takeover target and offer premium and acquirers’ announcement returns are positively associated with firms’ target price premium. We also show that a long-short trading strategy formed on target prices and firms’ takeover likelihood generates economically significant returns. Our results are robust to a battery of additional analysis, and the informativeness of target prices is not subsumed by other analyst-forecast outputs such as earnings forecasts and recommendations. Overall, our findings suggest that analysts convey valuable information through target price forecasts, which are useful for participants in the corporate takeover markets.
Original languageEnglish
Pages (from-to)1134-1171
Number of pages38
JournalJournal of Business Finance and Accounting
Issue number5-6
Early online date18 Jan 2021
Publication statusPublished - 6 Jun 2021

Bibliographical note

Publisher Copyright:
© 2021 John Wiley & Sons Ltd

Structured keywords

  • AF Corporate Finance


  • Target price
  • Offer premium
  • Takeover likelihood
  • Mergers and acquisitions
  • analyst forecast


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