Determinant factors of errors in weighed average cost calculation in public tender acquisitions of listed companies shares

Abstract

In business mergers and acquisitions processes, it is vital that these are adequately assessed to reflect thei r potential to generate future results. Thus, the assessment becomes an auxiliary tool in the decision–making process. This research, by taking the assumption that the holder of privileged information may use this advantage to manipulate the outcome of the evaluation, had the objective to analyze the determining factors for the occurrence of errors in the calculation of WACC in the appraisal reports of the OPAs made in the period from 2011 to 2015. For this purpose, the Probit method was chosen to capture the probability of occurrence or non-occurrence of error in relation to economic-financial variables related to information asymmetry: level of governance, risk, cost of capital, and firm size. Thirty-four reports were analyzed, in which errors were observed, based on the classification proposed by Fernández and Bilan (2007), with a higher frequency of the type 2 error. We identified the presence of significance statistic only in the firm size for type 8 error, at the level of 5%. It is concluded that the errors identified in the evaluation reports can occur as random events, without being directly related to the company that produces it.

Keywords: evaluation reports, errors, weighted average cost of capital.