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The information value of M&A press releases

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  • Cao, Yang
  • Kiesel, Florian
  • Leung, Henry

Abstract

How do managers comment on merger transactions? By analyzing the initial public announcements of mergers and acquisitions (M&As) from 1995 through 2020 and extracting the linguistic sentiment from statements made by managers of target and acquirer firms, we provide new evidence on the informational value of M&A disclosures. We find that positive sentiment by the target firm results in positive returns for the target. However, when the target firm disagrees with the sentiment of the acquirer, this results in lower returns for the target. Further, when the target displays positive sentiment, this increases the likelihood of merger completion and shortens the time to completion of the deal. We decompose acquirer sentiment into manipulative and fundamental components and demonstrate that acquirer CEOs with low confidence produce M&A statements that are more manipulative. This suggests that, while sentiment in M&A disclosures contains information about fundamentals and managerial attitudes, it can be manipulated to protect the personal interests of managers.

Suggested Citation

  • Cao, Yang & Kiesel, Florian & Leung, Henry, 2023. "The information value of M&A press releases," Journal of Corporate Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:corfin:v:82:y:2023:i:c:s0929119923001141
    DOI: 10.1016/j.jcorpfin.2023.102465
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    References listed on IDEAS

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    1. Kai Li & Tingting Liu & Juan (Julie) Wu, 2018. "Vote Avoidance and Shareholder Voting in Mergers and Acquisitions," The Review of Financial Studies, Society for Financial Studies, vol. 31(8), pages 3176-3211.
    2. Matthew T. Billett & Yiming Qian, 2008. "Are Overconfident CEOs Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers," Management Science, INFORMS, vol. 54(6), pages 1037-1051, June.
    3. Hribar, Paul & Melessa, Samuel J. & Small, R. Christopher & Wilde, Jaron H., 2017. "Does managerial sentiment affect accrual estimates? Evidence from the banking industry," Journal of Accounting and Economics, Elsevier, vol. 63(1), pages 26-50.
    4. Yan, Shan, 2015. "Managerial attitudes and takeover outcomes: Evidence from corporate filings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 35(C), pages 30-44.
    5. Liao, Rose & Wang, Xinjie & Wu, Ge, 2021. "The role of media in mergers and acquisitions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 74(C).
    6. Stewart, Christopher R., 2023. "Appraisal rights and corporate disclosure during mergers and acquisitions," Journal of Accounting and Economics, Elsevier, vol. 75(1).
    7. Michael Lemmon & Evgenia Portniaguina, 2006. "Consumer Confidence and Asset Prices: Some Empirical Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1499-1529.
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    Cited by:

    1. Mehmet E. Akbulut & Emily Jian Huang & Qingzhong Ma & Athena Wei Zhang, 2024. "New blockholder and investor limited attention: Evidence from private acquisitions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 4393-4427, December.

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    More about this item

    Keywords

    M&A; Initial public announcements; Textual analysis; Sentiment; Disagreement; CEO overconfidence;
    All these keywords.

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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