The Informational Consequences of Good and Bad Mergers

35 Pages Posted: 23 Mar 2021

See all articles by Samer Adra

Samer Adra

University of Birmingham

Leonidas G. Barbopoulos

University of Edinburgh

Date Written: March 19, 2021

Abstract

M&As have informational consequences beyond their immediate effects on stock prices. We find that acquirers receiving a positive market reaction to their M&A announcements experience an increase in the richness of their information environment, consistent with the theoretical predictions of Dow et al. (2017) [Dow, James, Itay Goldstein, and Alexander Guembel. 2017. “Incentives for Information Production in Markets Where Prices Affect Real Investment.” Journal of the European Economic Association 15 (4): 877–909]. Such acquirers attract more informed trading and more analysts in the post-announcement period. Their investments also become more sensitive to the information revealed in their share prices.

Keywords: Stock price informativeness; Endogenous information production; Mergers and Acquisitions; Analyst coverage; Tobin’s Q

JEL Classification: G14, G31, G34

Suggested Citation

Adra, Samer and Barbopoulos, Leonidas G., The Informational Consequences of Good and Bad Mergers (March 19, 2021). Available at SSRN: https://ssrn.com/abstract=3808344 or http://dx.doi.org/10.2139/ssrn.3808344

Samer Adra

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

Leonidas G. Barbopoulos (Contact Author)

University of Edinburgh ( email )

University of Edinburgh Business School
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom

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