Disclosures About Key Value Drivers in M&A Announcement Press Releases: An Exploratory Study

Andrei Filip, Gerald J. Lobo, Luc Paugam and Hervé Stolowy
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Andrei Filip: Catholic University of Lille - IESEG School of Management
Gerald J. Lobo: University of Houston - C.T. Bauer College of Business
Luc Paugam: HEC Paris, Accounting and Management Control Department; CFA Society France
Hervé Stolowy: HEC Paris

No 1436, HEC Research Papers Series from HEC Paris

Abstract: We investigate the association between disclosures about key value drivers (i.e., growth, synergies, human capital, brands, customers and technology) in press releases announcing mergers and acquisitions (M&A) deals and acquirer stock returns upon the announcement. We find that, after controlling for the main characteristics of the deal, acquirers that use more terms about these value drivers in press releases exhibit more negative market returns around the M&A announcement. An increase of 10% in the number of terms used about generic value drivers is associated with a decrease in announcement market-adjusted returns of approximately 43 basis points. The negative association between terms about value drivers and acquirer stock returns is stronger for larger deals. We also find that disclosures about these value drivers in M&A announcement press releases are consistent with the subsequent subjective valuation of intangible assets recognized in acquirers’ financial statements through the purchase price allocation. Our findings are relevant for investors attempting to interpret early signals about the performance of M&As and for managers communicating about these strategic investment decisions.

Keywords: Mergers and acquisitions; Press releases; Investor reaction; Value drivers; Goodwill; Purchase price allocation (search for similar items in EconPapers)
JEL-codes: G34 M41 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2021-02-23
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1436

DOI: 10.2139/ssrn.3787426

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