Do Stock Analysts Influence Merger Completion? An Examination of Postmerger Announcement Recommendations

David Becher, Jonathan B. Cohn () and Jennifer L. Juergens ()
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Jonathan B. Cohn: Finance Department, University of Texas at Austin, Austin, Texas 78712
Jennifer L. Juergens: Department of Finance, LeBow College of Business, Drexel University, Philadelphia, Pennsylvania 19104

Management Science, 2015, vol. 61, issue 10, 2430-2448

Abstract: This paper investigates the effects of analyst recommendations issued after a merger announcement on deal completion. We find the probability of completion increases (decreases) with the favorability of acquirer (target) recommendations. Results from instrumental variables tests support causality running from recommendations to merger outcomes. Additional tests suggest that these relations are driven by target shareholders reassessing the merger offer in response to movements in acquirer and target valuations. We also find that favorably recommended firms in a proposed merger underperform following deal resolution, suggesting that investors overreact to postmerger announcement recommendations. This paper was accepted by Wei Jiang, finance .

Keywords: mergers; analysts; merger success; valuation (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:61:y:2015:i:10:p:2430-2448

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