The information content of target price forecasts: Evidence from mergers and acquisitions

Abstract This paper investigates the informativeness and value relevance of analyst target prices in context mergers acquisitions. Our results indicate that firms with high 12‐month ahead relative to current stock are more likely become a takeover offer premium, acquirers’ announcement returns positively associated firms’ price premium. We also show long‐short trading strategy formed on likelihood generates economically significant returns. robust battery additional analysis, is not subsumed by other forecast outputs such as earnings forecasts recommendations. Overall, our findings suggest analysts convey valuable information through forecasts, which useful for participants corporate markets.