The Role of Media in Mergers and Acquisitions.

DOI

10.1016/j.intfin.2021.101299

Abstract

Using a novel dataset of news events for 170,000 entities across over 100 countries, we examine how media sentiment could affect firm acquisition decisions. Studying 77,552 completed merger and acquisition (M&A) deals around the world from 2000 to 2015, we find that firms with high media sentiment are more likely to become an acquirer and to pay a higher deal premium. The effect of media on the likelihood of an acquisition is stronger for cross-border deals, in countries with higher governance standards, larger firms with fewer financial constraints, and firms with higher market-to-book ratio and more media coverage. Target firms typically have low media sentiment. Acquirers with high media sentiment experience significantly positive returns prior to acquisitions and negative returns post-acquisition, inconsistent with theories of media content as a proxy for new information about fundamental asset values. Overall, we show that the media play an important role in the market for M&As.

Document Type

Restricted Article: Campus only access

Publication Date

9-2021

Publisher Statement

Copyright © 2021, Elsevier B.V.

DOI: https://doi.org/10.1016/j.intfin.2021.101299

The definitive version is available at: https://www.sciencedirect.com/science/article/pii/S1042443121000184

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