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The role of media in mergers and acquisitions

Author

Listed:
  • Liao, Rose
  • Wang, Xinjie
  • Wu, Ge

Abstract

Using a novel dataset of news events for 170,000 entities across over 100 countries, we examine how media sentiment could affect firm acquisition decisions. Studying 77,552 completed merger and acquisition (M&A) deals around the world from 2000 to 2015, we find that firms with high media sentiment are more likely to become an acquirer and to pay a higher deal premium. The effect of media on the likelihood of an acquisition is stronger for cross-border deals, in countries with higher governance standards, larger firms with fewer financial constraints, and firms with higher market-to-book ratio and more media coverage. Target firms typically have low media sentiment. Acquirers with high media sentiment experience significantly positive returns prior to acquisitions and negative returns post-acquisition, inconsistent with theories of media content as a proxy for new information about fundamental asset values. Overall, we show that the media play an important role in the market for M&As.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:intfin:v:74:y:2021:i:c:s1042443121000184
    DOI: 10.1016/j.intfin.2021.101299
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    More about this item

    Keywords

    Mergers; Media; Investor sentiment; Governance;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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