Implications of Disclosing Ongoing M&A Negotiations: The Role of Managerial Learning

68 Pages Posted: 12 Feb 2014 Last revised: 21 Oct 2019

See all articles by Chong Huang

Chong Huang

University of California, Irvine - Paul Merage School of Business

Qiguang Wang

Hong Kong Baptist University (HKBU)

Date Written: October 19, 2019

Abstract

This paper explores the economic impact of disclosing ongoing mergers and acquisitions (M&A) negotiations. We present an informational feedback model in which target firms learn from their stock prices, shaping negotiation outcomes. Our analysis identifies both conditional and unconditional effects of disclosure. The conditional effects illustrate how stock price runups influence deal premia, deal probabilities, and division of synergy, offering explanations for documented empirical findings. The unconditional effects point to conditions under which disclosure could facilitate or jeopardize value-creating deals. We also offer new empirical predictions to test the managerial learning hypothesis and discuss the broader implications for corporate governance.

Keywords: M&A negotiation, premium-runup relation, informational feedback, managerial learning, disclosure, information leakage, real effect

JEL Classification: G14, G34, G38

Suggested Citation

Huang, Chong and Wang, Qiguang, Implications of Disclosing Ongoing M&A Negotiations: The Role of Managerial Learning (October 19, 2019). Available at SSRN: https://ssrn.com/abstract=2393760 or http://dx.doi.org/10.2139/ssrn.2393760

Chong Huang (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA 92697-3125
United States

Qiguang Wang

Hong Kong Baptist University (HKBU) ( email )

Department of Economics
Kowloon, Hong Kong
Hong Kong

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