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

Ruby Brownen-Trinh, Tuan Q Ho, Fangming Xu*

*Corresponding author for this work

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


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
JournalJournal of Business Finance and Accounting
Publication statusAccepted/In press - 20 Nov 2020


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

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