Managerial Expectations and the Performance of Acquiring Firms: The Contribution of Soft Data

48 Pages Posted: 15 Mar 2010

See all articles by Jim Cicon

Jim Cicon

University of Central Missouri

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business

Narayanan Jayaraman

Georgia Institute of Technology - Scheller College of Business

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Date Written: December 1, 2009

Abstract

This study examines whether the “soft” information present in merger and acquisition announcement press releases contains incrementally valuable news relative to traditional “hard” data and analyst generated information. We use Diction, a textual-analysis program, to construct measures of optimism and synergy expectations for more that 1,400 mergers and acquisition announcements over the period 1995 to 2007. We find that our measure of synergy expectations is inversely related to acquirer announcement period returns and continues to be negatively related to long-term performance up to two years post merger. We find that managerial optimism is not valued by the market and is especially discounted when analysts hold contrary views regarding the attractiveness of a merger. Overall, we conclude that the soft data contained in M&A announcements provides meaningful information to investors.

Keywords: Mergers, synergy, soft information

JEL Classification: G20, G34

Suggested Citation

Cicon, James and Clarke, Jonathan and Jayaraman, Narayanan and Ferris, Stephen P., Managerial Expectations and the Performance of Acquiring Firms: The Contribution of Soft Data (December 1, 2009). Available at SSRN: https://ssrn.com/abstract=1570783 or http://dx.doi.org/10.2139/ssrn.1570783

James Cicon

University of Central Missouri ( email )

Warrensburg, MO 64093-5070
United States

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4929 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/directory/clarke.html

Narayanan Jayaraman

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4389 (Phone)
404-894-6030 (Fax)

Stephen P. Ferris (Contact Author)

University of Missouri at Columbia - Department of Finance ( email )

214 Middlebush Hall
Columbia, MO 65211
United States
573-882-6272 (Phone)
573-884-6296 (Fax)

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