 The fed information shocks and the market for corporate control: Predictive and causal effectsSamer Adra, Leonidas G. Barbopoulos and Anthony Saunders Journal of Corporate Finance, 2025, vol. 90, issue C Abstract: We show that contractionary monetary shocks, when reflecting a positive macroeconomic assessment by the Federal Reserve (hereafter “Fed”), predict an economic environment that is characterized by (a) a rise in M&A activity, (b) a higher likelihood of M&A completion, (c) larger bidder gains, (d) limited concerns about M&A overpayment, and (e) higher premia offered by foreign bidders to U.S. targets. Further, Fed information shocks have a standalone and direct causal effect on market expectations of M&A gains. That is, positive Fed information shocks trigger a positive revaluation of pending M&A. This revaluation effect, which holds after controlling for macroeconomic conditions and changes in economic forecasts, is more pronounced in deals that are relatively large, financed with stock, and have received a negative initial market reaction. Overall, our results highlight the independent and credible signaling role of the Fed in the realm of M&A. Keywords: Monetary policy; Mergers and acquisitions; Fed Information shocks; Takeover premium; Cumulative abnormal returns (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:90:y:2025:i:c:s0929119924001433 DOI: 10.1016/j.jcorpfin.2024.102681 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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