Economics at your fingertips  

The impact of analyst coverage on partial acquisitions: Evidence from M&A premium and firm performance in China

Ying Li, Miao Lu and Y. Ling Lo

International Review of Economics & Finance, 2019, vol. 63, issue C, 37-60

Abstract: In this paper, we examine how analyst coverage affects mergers and acquisitions in China. By using partial acquisitions in our study, we are able to directly examine the post-acquisition performance of the targets. Our results are robust and consistent with our hypotheses. Analyst coverage can effectively reduce information asymmetry. As a result, targets with high analyst coverage experience more immediate and accurate price correction in the short run, as indicated in the acquisition premium. In the long run, targets with high analyst coverage outperform targets with low analyst coverage up to two years post acquisition, based on EPS. Our results indicate analyst coverage can effectively (1) speed up price discovery by bringing targets' stock prices closer to their equilibria, (2) promote market efficiency by reducing information asymmetry, (3) help acquirers make better asset allocation and investment decisions in the acquisition market by reducing information asymmetry, and (4) support targets' long-term performance by providing them with better access to external resources.

Keywords: Analyst coverage; Partial acquisitions; M&A premium; Firm performance (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.iref.2018.08.004

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-05-02
Handle: RePEc:eee:reveco:v:63:y:2019:i:c:p:37-60