Information asymmetry, cross-listing, and post-M&A performance

Sangcheol Song, Yuping Zeng and Bing Zhou

Journal of Business Research, 2021, vol. 122, issue C, 447-457

Abstract: This study examines how target opaqueness and the acquirer’s cross-listing in a developed financial market impact the alignment between the stock market’s initial reaction to an M&A deal announcement and the acquirer’s post-M&A performance by affecting the level of information asymmetry between acquirers’ managers and stock market investors. We hypothesize that target opaqueness weakens, whereas the acquirer’s cross-listing enhances, the alignment between the initial stock market reaction and the acquirer’s post-acquisition performance. Additionally, the weakening effect of target opaqueness is smaller when the acquirer is cross-listed in a financially more developed market. From a sample of mergers and acquisitions (M&A) deals made by Chinese acquirers, we find that the alignment between the initial stock market reaction and acquirer’s post-acquisition performance is weakened when the targets are private, high-tech, or foreign, while being strengthened when the acquirers are cross-listed in Hong Kong stock exchanges. Further, the weakening effects of private, high-tech, or foreign targets are smaller when the acquirers are cross-listed. This study contributes to the M&A literature by examining factors that moderate the alignment between stock market’s ex-ante valuation of M&A deals and the ex-post performance of those deals.

Keywords: M&As; Stock market predictability; Post-acquisition performance; Information asymmetry; Cross-listing (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:122:y:2021:i:c:p:447-457

DOI: 10.1016/j.jbusres.2020.08.035

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