Do Stock Analysts Influence Merger Completion? An Examination of Post-Merger Announcement Recommendations

47 Pages Posted: 8 Mar 2010 Last revised: 30 Aug 2014

See all articles by David Becher

David Becher

Drexel University

Jonathan B. Cohn

University of Texas at Austin

Jennifer L. Juergens

Cornerstone Research

Date Written: August 18, 2014

Abstract

This paper investigates the effects of analyst recommendations issued after a merger announcement on deal completion. We find the probability of completion increases (decreases) with the favorability of acquirer (target) recommendations. Results from instrumental variables tests support causality running from recommendations to merger outcomes. Additional tests suggest that these relations are driven by target shareholders reassessing the merger offer in response to movements in acquirer and target valuations. We also find that favorably-recommended firms in a proposed merger underperform following deal resolution, suggesting that investors overreact to post-merger announcement recommendations.

Keywords: Mergers, Analysts, Merger Success, Valuation

JEL Classification: G32, G34, G21

Suggested Citation

Becher, David and Cohn, Jonathan B. and Juergens, Jennifer L., Do Stock Analysts Influence Merger Completion? An Examination of Post-Merger Announcement Recommendations (August 18, 2014). Available at SSRN: https://ssrn.com/abstract=1566991 or http://dx.doi.org/10.2139/ssrn.1566991

David Becher

Drexel University ( email )

3220 Market Street
1127 Gerri C LeBow Hall
Philadelphia, PA 19104
United States
215-895-2274 (Phone)
215-895-2295 (Fax)

Jonathan B. Cohn

University of Texas at Austin ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-6827 (Phone)

Jennifer L. Juergens (Contact Author)

Cornerstone Research

2001 K Street NW
North Tower, Suite 800
Washington, DC 20006
United States

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