This thesis investigates the use of independent expert reports by Australian takeover targets for the period 1997- 2000. It develops a framework in which expert reports act as both a voluntary disclosure and a signalling mechanism for the credible release of private information from target directors to shareholders, consistent with the substitution model of Hughes (1986). Two distinct phases of the study address: 1) the factors influencing the voluntary use of independent expert reports by Australian target firms, and the effect of expert reports on bid success and the occurrence of bid revisions, and 2) whether expert reports contain information that is value-relevant to the market. The latter issue is considered from two perspectives: 1) the gain to target shareholders over the bid period from the use of an expert report, and 2) the 'short window' market reaction to the release of the expert report to target shareholders.
Results indicate that the target's decision to use an expert report is influenced by the nature of the bid (friendly or contested), the form of the consideration (cash or scrip), the exclusion of target directors from making a recommendation to shareholders, firm size and industry classification. Bid revisions are marginally related to the use of an expert report, and strongly related to the expert's classification of the bid as 'not reasonable'. Further, the expert's valuation of the target has a significantly positive effect on shareholder gain and the expert's opinion that the bid is 'not reasonable' significantly increases abnormal returns over the event window. Due to the limited nature of the extant literature, this paper presents original findings in its extension of the voluntary disclosure literature to a novel setting.