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Do managers keep their word? The disclosure of merger intention at pre-merger issuance and M&A performance

Author

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  • Guo, Jie (Michael)
  • Li, Lu
  • Hu, Nan
  • Wang, Xing

Abstract

This paper investigates whether disclosing merger intention at the announcement of equity/debt issuance has an impact on subsequent M&A transactions. We find that companies tend to issue higher proceeds when they reveal their merger intentions, and, subsequently, they are more likely to complete the merger deal itself and pay a higher bid premium. However, we did not find a significant difference in merger performance between firms revealing merger intention and others. Our finding is consistent with the capital need theory.

Suggested Citation

  • Guo, Jie (Michael) & Li, Lu & Hu, Nan & Wang, Xing, 2019. "Do managers keep their word? The disclosure of merger intention at pre-merger issuance and M&A performance," Finance Research Letters, Elsevier, vol. 28(C), pages 20-31.
    • Handle: RePEc:eee:finlet:v:28:y:2019:i:c:p:20-31
    DOI: 10.1016/j.frl.2018.03.007
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    More about this item

    Keywords

    Merger intention; Equity issuance; Debt issuance; Mergers & acquisitions; Event studies;
    All these keywords.

    JEL classification:

    • 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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