Bidder earnings forecasts in mergers and acquisitions

Amir Amel-Zadeh and Geoff Meeks

Journal of Corporate Finance, 2019, vol. 58, issue C, 373-392

Abstract: This study finds that pro-forma earnings forecasts by bidding firms during acquisitions are associated with a higher likelihood of deal completion, expedited deal closing, and with a lower acquisition premium − but only in stock-financed acquisitions. Analysts also respond to these forecasts by revising their forecasts for the bidder upward. However, the benefits of forecast disclosure only accrue to bidders with a strong forecasting reputation prior to the acquisition. Explaining why not all bidders forecast, we document a higher likelihood of post-merger litigation and CEO turnover for bidders with a weak forecasting reputation and for those that underperform post-merger.

Keywords: Pro-forma earnings forecasts; Mergers and acquisitions; Voluntary disclosure; Merger forecasts; Earnings per share; Accretion; Dilution (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:58:y:2019:i:c:p:373-392

DOI: 10.1016/j.jcorpfin.2019.06.002

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