Does Transparency Increase Takeover Vulnerability?

We study how transparency affects takeover probability and stock returns. If transparency helps acquiring firms to determine target value or synergy, then it can increase takeover vulnerability. Estimated takeover probabilities produce results consistent with this view and offer better fit over 25 years of takeover data. Notably, the relation between takeover likelihood and stock returns is stronger when takeover likelihood is more precisely estimated by our augmented model that includes transparency. Moreover, a takeover factor constructed with the new takeover probability better captures variation in the cross-section of stock returns and is associated with higher premium.