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The Role of Social Connectedness: Evidence from Mergers and Acquisitions

Author

Listed:
  • Giang Nguyen

    (Faculty of Political Science and Economics, Waseda University 1-6-1 Nishi-Waseda, Shinjuku, Tokyo 169-8050, Japan)

  • Hannah Nguyen

    (Department of Banking and Finance, Monash University Caulfield East, Victoria 3145, Australia)

  • Hung Pham

    (Department of Banking and Finance, Monash University Caulfield East, Victoria 3145, Australia)

Abstract

Using a comprehensive dataset of social network ties between U.S. counties, we document higher announcement returns for acquirers that are more socially proximate to their targets. Our findings are robust to the inclusion of geographical proximity and withstand endogeneity concerns. Consistent with the information asymmetry hypothesis, we show that the effect of social connectedness is more pronounced when targets have high information opacity, as proxied by target status, analyst coverage, bid–ask spreads, R&D, and high-tech classifications. In addition, social connectedness lowers advisory fees, reduces deal premiums, and yields better acquirer long-term performance.

Suggested Citation

  • Giang Nguyen & Hannah Nguyen & Hung Pham, 2021. "The Role of Social Connectedness: Evidence from Mergers and Acquisitions," Working Papers 2116, Waseda University, Faculty of Political Science and Economics.
    • Handle: RePEc:wap:wpaper:2116
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    Cited by:

    1. Xinming Du, 2023. "Symptom or Culprit? Social Media, Air Pollution, and Violence," CESifo Working Paper Series 10296, CESifo.

    More about this item

    Keywords

    Social connectedness; merger and acquisition; information asymmetry;
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