Rumor rationales: The impact of message justification on article credibility

Sandra Betton, Frederick Davis and Thomas Walker

International Review of Financial Analysis, 2018, vol. 58, issue C, 271-287

Abstract: We perform content analysis on a unique sample of 2074 first-instance published takeover rumors to study how the rationale underlying a publication relates to its credibility and its association with firm returns and rumor accuracy. While most takeover rumors are inaccurate, we find that distinguishing between various justifications of potential takeover activity as provided within the published article serves to predict takeover announcements, subsequent firm abnormal returns, and – to a lesser extent – premiums. In addition, we note a clear distinction in results based upon the informative versus speculative nature of the rumor. We interpret this evidence as supportive of our hypothesis that the underlying rationale justifying the release of public information affects firm share prices and aids in predictability.

Keywords: Mergers and acquisitions; Takeover rumors; Trading strategies; Financial content analysis; Market anticipation; Takeover predictability (search for similar items in EconPapers)
JEL-codes: G14 G30 G34 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:58:y:2018:i:c:p:271-287

DOI: 10.1016/j.irfa.2018.03.013

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