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The Anchoring Effect in Mergers and Acquisitions: Evidence from an Emerging Market

Nastasia Stepanova (), Vladislav Savelyev () and Malika Shaikhutdinova ()
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Nastasia Stepanova: National Research University Higher School of Economics
Vladislav Savelyev: National Research University Higher School of Economics
Malika Shaikhutdinova: National Research University Higher School of Economics

No WP BRP 63/FE/2018, HSE Working papers from National Research University Higher School of Economics

Abstract: This article examines the presence of the reference price effect in mergers and acquisitions in Russia, which can act as a distortion in investor perception of the influence a deal has on a company. In this study we use the Russian market as a laboratory for the investigation of behavioral effects in a relatively inefficient market. We find a relationship between the acquirer’s announcement period return and the proximity of its pre-announcement share price to the 52-week high. The 52-week high serves as a salient anchor even though it is economically irrelevant for valuation purposes. This effect appears to be stronger for deals associated with higher levels of uncertainty. The findings confirm the presence of the anchoring bias in evaluating the effect of a merger or acquisition announcement by Russian investors. We demonstrate a significant anchoring effect even for deals with a blocking (>10%) or a controlling stake (>25%) in an emerging market with a highly concentrated ownership.

Keywords: Mergers; Acquisitions; Anchoring; Reference point; Behavioral corporate finance (search for similar items in EconPapers)
JEL-codes: G34 G41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-cis, nep-com and nep-tra
Date: 2018
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Published in WP BRP Series: Financial Economics / FE, January 2018, pages - 35

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