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Do Stock Analysts Influence Merger Completion? An Examination of Postmerger Announcement Recommendations

Author

Listed:
  • David A. Becher

    (Department of Finance, LeBow College of Business, Drexel University, Philadelphia, Pennsylvania 19104; and Wharton Financial Institutions Center, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Jonathan B. Cohn

    (Finance Department, University of Texas at Austin, Austin, Texas 78712)

  • Jennifer L. Juergens

    (Department of Finance, LeBow College of Business, Drexel University, Philadelphia, Pennsylvania 19104)

Abstract

This paper investigates the effects of analyst recommendations issued after a merger announcement on deal completion. We find the probability of completion increases (decreases) with the favorability of acquirer (target) recommendations. Results from instrumental variables tests support causality running from recommendations to merger outcomes. Additional tests suggest that these relations are driven by target shareholders reassessing the merger offer in response to movements in acquirer and target valuations. We also find that favorably recommended firms in a proposed merger underperform following deal resolution, suggesting that investors overreact to postmerger announcement recommendations. This paper was accepted by Wei Jiang, finance .

Suggested Citation

  • David A. Becher & Jonathan B. Cohn & Jennifer L. Juergens, 2015. "Do Stock Analysts Influence Merger Completion? An Examination of Postmerger Announcement Recommendations," Management Science, INFORMS, vol. 61(10), pages 2430-2448, October.
    • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:10:p:2430-2448
    DOI: 10.1287/mnsc.2014.2065
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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