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Disclosures About Key Value Drivers in M&A Announcement Press Releases: An Exploratory Study

Author

Listed:
  • Filip, Andrei

    (Catholic University of Lille - IESEG School of Management)

  • Lobo, Gerald J.

    (University of Houston - C.T. Bauer College of Business)

  • Paugam, Luc

    (HEC Paris, Accounting and Management Control Department; CFA Society France)

  • Stolowy, Hervé

    (HEC Paris)

Abstract

We investigate the association between disclosures about key value drivers (i.e., growth, synergies, human capital, brands, customers and technology) in press releases announcing mergers and acquisitions (M&A) deals and acquirer stock returns upon the announcement. We find that, after controlling for the main characteristics of the deal, acquirers that use more terms about these value drivers in press releases exhibit more negative market returns around the M&A announcement. An increase of 10% in the number of terms used about generic value drivers is associated with a decrease in announcement market-adjusted returns of approximately 43 basis points. The negative association between terms about value drivers and acquirer stock returns is stronger for larger deals. We also find that disclosures about these value drivers in M&A announcement press releases are consistent with the subsequent subjective valuation of intangible assets recognized in acquirers’ financial statements through the purchase price allocation. Our findings are relevant for investors attempting to interpret early signals about the performance of M&As and for managers communicating about these strategic investment decisions.

Suggested Citation

  • Filip, Andrei & Lobo, Gerald J. & Paugam, Luc & Stolowy, Hervé, 2021. "Disclosures About Key Value Drivers in M&A Announcement Press Releases: An Exploratory Study," HEC Research Papers Series 1436, HEC Paris.
    • Handle: RePEc:ebg:heccah:1436
    DOI: 10.2139/ssrn.3787426
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    More about this item

    Keywords

    Mergers and acquisitions; Press releases; Investor reaction; Value drivers; Goodwill; Purchase price allocation;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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