Mergers and acquisitions comment letters and analysts' earnings forecasts: Evidence from China

Liangyong Wan, Chen Li, Rui Xu and Hao Zhang

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

Abstract: In this study we examine the effect of the mergers and acquisitions (M&A) comment letters on the analysts' earnings forecasts in China. Using the M&A data of listed companies between 2014 and 2018 as the main sample, we show that the M&A comment letters can reduce analysts' earnings forecast optimism. Additionally, the impact of the M&A comment letters on analysts' earnings forecast optimism is more pronounced in firms with higher market sentiment and higher conflicts of interest. Finally, the textual characteristics of the M&A comment letters and the classification of questions in the M&A comment letters also influence analysts' earnings forecast optimism. Our research broadens the economic consequences of the M&A comment letters and provides a richer theoretical perspective and empirical evidence to understand the effectiveness of non-penalty regulation.

Keywords: M&a comment letters; Analysts' earnings forecasts; Optimism bias (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:s0927538x24002221

DOI: 10.1016/j.pacfin.2024.102470

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