Pricing media sentiment: Evidence from global mergers and acquisitions

Syed Shams, Sudipta Bose and Ali Sheikhbahaei

Pacific-Basin Finance Journal, 2024, vol. 86, issue C

Abstract: In this study, we examine the association between bidders' media sentiment and the acquisition performance of 5196 domestic mergers and acquisitions across 40 countries from 2000 to 2018. Our results show a causal and positive relationship between media sentiment and the bidders' announcement returns. This supports the investor attention theory, suggesting that investors perceive bidders' media sentiment as informative and value-relevant. Using a dozen major terrorist attacks worldwide as exogenous shocks to business news, we establish a more credible causal link from media sentiment to market reactions. Our results are more pronounced for firms in a higher information asymmetry environment. Additionally, our study finds that higher levels of voice and accountability within a country mitigate the positive impact of media sentiment on bidder returns. We conduct additional robustness tests to further validate these findings and to address possible endogeneity concerns.

Keywords: Media sentiment; Announcement returns; Domestic takeover market; Country governance (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:86:y:2024:i:c:s0927538x24001987

DOI: 10.1016/j.pacfin.2024.102447

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