Acceso usuarios
E. Lukas, C. Heimann
To date, a few empirical studies exist that investigate the use of earnout contracts in mergers and acquisitions (M&As). However, two limitations can be attested. First, the studies predominantly investigate earnouts in Anglo-American economies and it is questionable whether we can generalize on these findings for other economies. Second, while earnouts have become an increasingly popular way of coping with information asymmetries and reducing the risk of overpayment in takeovers, less is known about what really drives the design of such contracts. To answer these questions, we conduct an event study that examines abnormal returns for different M&A contracts for a cross-industry sample of German acquirers. The novel aspect of this article is that we explicitly present a theoretical model to discuss the effect of technological-induced information asymmetries on the design of earnout contracts. While we find support for the fact that capital markets favour the use of earnouts when uncertainty and the buyer's ability to reduce technological-induced information asymmetry is high, a too-long earnout period specified in the contract appears to be detrimental.
