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Smart investments by smart money: Evidence from acquirers' projected synergies

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  • Ismail, Ahmad
  • Khalil, Samer
  • Safieddine, Assem
  • Titman, Sheridan

Abstract

Institutional investors tend to accumulate the shares of firms that announce acquisitions. The tendency to accumulate shares is stronger when the acquirer discloses synergy forecasts, and it is especially strong when the disclosed synergies are higher. This evidence is consistent with the idea that institutional investors are attracted to situations where their superior access to management and analysts provides an information advantage. Indeed, this tendency to accumulate information sensitive shares is especially strong for hedge funds, which tend to have the greatest information advantage. Moreover, stock prices respond favorably in the quarter following the acquisition announcement when higher institutional holdings are revealed.

Suggested Citation

  • Ismail, Ahmad & Khalil, Samer & Safieddine, Assem & Titman, Sheridan, 2019. "Smart investments by smart money: Evidence from acquirers' projected synergies," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 343-363.
    • Handle: RePEc:eee:corfin:v:56:y:2019:i:c:p:343-363
    DOI: 10.1016/j.jcorpfin.2019.03.003
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    More about this item

    Keywords

    Stock picking; Mergers; Acquisitions; Institutional investors;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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