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Investor Inattention to All-Cash Acquisition Announcements: A Joint Day-Time Analysis in the Spanish Market

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  • José Emilio Farinós

    (Department of Corporate Finance, Faculty of Economics, University of Valencia, 46022 Valencia, Spain)

  • Begoña Herrero

    (Department of Corporate Finance, Faculty of Economics, University of Valencia, 46022 Valencia, Spain)

  • Miguel Ángel Latorre

    (Department of Accounting, Finance and Management Control, Faculty of Legal, Economics and Social Sciences, Catholic University of Valencia “San Vicente Mártir”, 46003 Valencia, Spain)

Abstract

Prior studies suggest that investors have limited attention, which determines the speed with which information is incorporated into share prices and, in turn, affects the efficiency of the markets. Unlike other corporate events, the information contained in an acquisition announcement is generally less standard and more complicated to process. Therefore, investor inattention is less likely around this event. In this study we test the existence of investor inattention for a sample of all-cash acquisition announcements of listed and unlisted target firms released by listed Spanish firms from 1998 to 2018. Cash acquisitions allow us to control for the strategic behavior of overvalued companies engaged in stock-financed acquisitions. We perform a joint analysis of day of the week and time of trade from both a univariate and a multivariate perspective, after controlling for several factors that are related to the market reaction to acquisition announcements. Consistent with the notion that investors are less attentive to Friday announcements, we find a significant lower market reaction to acquisition announcements released during market trading hours both in terms of price and trading volume.

Suggested Citation

  • José Emilio Farinós & Begoña Herrero & Miguel Ángel Latorre, 2021. "Investor Inattention to All-Cash Acquisition Announcements: A Joint Day-Time Analysis in the Spanish Market," Sustainability, MDPI, vol. 13(2), pages 1-22, January.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:2:p:721-:d:479686
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