Can financial media sentiment predict merger and acquisition performance?

Bo Yang, Ji Sun, Guo, Jie (Michael) and Jiayi Fu

Economic Modelling, 2019, vol. 80, issue C, 121-129

Abstract: This paper explores whether and how media serves as an information intermediary in the capital market and predicts value creation from mergers and acquisitions (M&As). Using a sample of 288 M&A deals in the U.S. market from 2000 to 2015, this paper examines whether pre-merger news about acquirers correlates to M&A performance. The empirical evidence shows that a positive media attitude before merger announcements has predictive power for stock returns in both the short and long run. Moreover, media pessimism is associated with higher bid premiums, meaning that acquirers must raise the bid price to offset the negative effects produced by the media. These findings suggest that media news contains information relevant to M&A performance and thus has implications for shareholder wealth.

Keywords: Media attitude; Merger and acquisitions; Merger performance (search for similar items in EconPapers)
JEL-codes: G14 G34 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:80:y:2019:i:c:p:121-129

DOI: 10.1016/j.econmod.2018.10.009

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