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The information value of M&A press releases

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  • Cao, Yang
  • Kiesel, Florian
  • Leung, Henry

Abstract

How do managers comment on merger transactions? By analyzing the initial public announcements of mergers and acquisitions (M&As) from 1995 through 2020 and extracting the linguistic sentiment from statements made by managers of target and acquirer firms, we provide new evidence on the informational value of M&A disclosures. We find that positive sentiment by the target firm results in positive returns for the target. However, when the target firm disagrees with the sentiment of the acquirer, this results in lower returns for the target. Further, when the target displays positive sentiment, this increases the likelihood of merger completion and shortens the time to completion of the deal. We decompose acquirer sentiment into manipulative and fundamental components and demonstrate that acquirer CEOs with low confidence produce M&A statements that are more manipulative. This suggests that, while sentiment in M&A disclosures contains information about fundamentals and managerial attitudes, it can be manipulated to protect the personal interests of managers.
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Suggested Citation

  • Cao, Yang & Kiesel, Florian & Leung, Henry, 2023. "The information value of M&A press releases," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 152731, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:152731
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/152731/
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    Cited by:

    1. An, Suwei & Liu, Yi & Tan, Xiaofen & Wu, Kai, 2024. "Manager sentiment, deal characteristics, and takeover performance," The British Accounting Review, Elsevier, vol. 56(6).
    2. Shams, Syed & Bose, Sudipta & Gunasekarage, Abeyratna & Velayutham, Eswaran, 2024. "Does continuous disclosure affect the market reaction to mergers and acquisitions announcements?," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    3. Kiosses, Nikolaos & Leventis, Stergios & Subeniotis, Demetres & Tampakoudis, Ioannis, 2025. "The impact of policy uncertainty on shareholder wealth: Evidence from bank M&A," Journal of Financial Stability, Elsevier, vol. 76(C).
    4. Aktas, Nihat & de Bodt, Eric & Dogan, Can Deniz, 2025. "Do investor reactions to merger announcements shape the writing of SEC filings?," The British Accounting Review, Elsevier, vol. 57(3).

    More about this item

    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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