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RESEARCH PAPERS | M & A


Disclosure

MANDATORY FINANCIAL DISCLOSURE AND M&A ACTIVITY
Marcelo Ortiz M., Caspar David Peter, Francisco UrzĂșa I., and Paolo F. Volpin
2022
Taking advantage of the implementation of the European Commission directives on the financial reporting of private firms, we explore the impact of mandatory financial disclosure on mergers and acquisitions. We find robust evidence that the volume of private firms becoming the target in M&A deals is positively correlated with mandatory disclosure. The analyses of deal characteristics and post-deal performance confirm our interpretation that financial disclosure increases M&A activity by reducing asymmetric information and uncertainty. >more


Impact of Social Media

CAN SOCIAL MEDIA INFORM CORPORATE DECISIONS? EVIDENCE FROM MERGER WITHDRAWALS
J. Anthony Cookson, Marina Niessner, and Christoph Schiller
2022
This paper examines the role of social media in informing corporate decision-making by studying the decision of firm management to withdraw an announced merger. A standard deviation decline in abnormal social media sentiment following a merger announcement predicts a 0.73 percentage point increase in the likelihood of merger withdrawal (18.9% of the baseline rate). The informativeness of social media for merger withdrawals is not explained by abnormal price reactions or news sentiment, and in fact, it is stronger when these other signals disagree. Consistent with learning from external information, we find that the social media signal is most informative for complex mergers in which analyst conference calls take a negative tone, driven by the Q&A portion of the call. Overall, these findings imply that social media is not a sideshow, but an important aspect of firm information environment. >more


Strategic Similarity

STRATEGIC SIMILARITY IN MERGERS AND ACQUISITIONS
Tina Oreski
2021
Using textual analysis and the firm life-cycle theory to proxy for a company's competitive strategy, this paper empirically examines the strategic similarity hypothesis. The findings show that mergers and acquisitions deals are more likely between companies implementing the same strategy. Moreover, same strategy deals yield higher announcement returns, asset and sales growth. The effect is more pronounced in a highly competitive environment and within an industry, confirming that strategic misalignment acts as a constraint to the merged company's optimal response to investment opportunities and market threats. Overall, the results reveal that synergies obtained from the overlapping strategies constitute an important determinant of public mergers and acquisitions. >more


Employee Health

HOW DO ACQUISITIONS AFFECT THE MENTAL HEALTH OF EMPLOYEES?
Laurent Bach, Ramin Baghai, Marieke Bos, and Rui Silva
2021
Using employer-employee level data linked to individual health records, we document that the incidence of stress, anxiety, depression, psychiatric medication usage, and even suicide increase following acquisitions. These effects are prevalent among employees from both targets and acquirers, in weak as well as in growing, profitable firms. Employees who experience negative career developments within the merging firms, 'blue-collar' workers, and employees with lower cognitive and non-cognitive skills are most affected. A variety of tests address endogeneity concerns, including an analysis exploiting failed mergers. Our findings point to mental illness as a significant non-pecuniary cost of acquisitions. >more


Investment Banks

BIG FISH IN SMALL PONDS: HUMAN CAPITAL MIGRATION AND THE RISE OF BOUTIQUE BANKS
Janet Gao, Wenyu Wang, and Xiaoyun Yu
2021
We study the comparative advantage of focused and multidivisional organizational forms at attracting valuable human capital. Using the M&A advisory industry as a laboratory, we show that high-performing individuals are more likely to migrate to boutique (focused) banks, particularly when facing cross-subsidization inside bulge bracket (multidivisional) banks, proxied by poor performance of their non-M&A departments. Such skilled labor migration improves the performance of boutique banks, potentially contributing to the rise of boutiques over the past two decades. Moreover, M&A deal outcomes differ when having boutique advisors. Our findings suggest corporate organizational structure and labor migration can jointly shape industry dynamics. >more


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