Analyst recommendations, acquirer’s valuation, and M&A performance: evidence from China

Yugang Chen, Jihua Lu and Yasir Shahab

Applied Economics, 2025, vol. 57, issue 54, 9185-9202

Abstract: This study investigates the effects of premerger analyst recommendations on mergers and acquisitions (M&A) announcement returns. We find that M&A announcement returns decrease with premerger analysts’ favourable recommendations (PAFR). Furthermore, we find that increasing acquirers’ valuations in the preannouncement period is a possible channel that allows PAFR to reduce M&A announcement returns. We explore three alternative explanations including, ‘analyst information role’, ‘analyst pressure’ and ‘informed trading’ explanations for our main nexus, and our findings are still robust. In an additional analysis, we find that this negative relationship is more pronounced among acquirers with (a) high information uncertainty (b), low media criticism, and (c) high investor attention. Moreover, we identify three sources of conflicts of interest in analyst recommendations: M&A relations, controlling shareholder share pledging, and stock ownership composition. Our research enriches the impact of analysts’ recommendations on M&A outcomes and provides new empirical evidence of analysts’ strengthening of overvaluation.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2024.2409844 (text/html)
Access to full text is restricted to subscribers.

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: https://EconPapers.repec.org/RePEc:taf:applec:v:57:y:2025:i:54:p:9185-9202

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2024.2409844

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().