Economic Consequences of Announcing Strategic Alternatives: A Voluntary Disclosure's Benefits and Costs

57 Pages Posted: 4 May 2021 Last revised: 4 Jun 2023

See all articles by Jenny Zha Giedt

Jenny Zha Giedt

George Washington University - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 10, 2023

Abstract

This study examines the benefits and costs to a company of publicly announcing that it is seeking a potential sale or merger. I find that the announcement leads to increased market attention and a more robust M&A sales process—the benefits of improved transparency. However, I also find evidence of the announcement alienating stakeholders and increasing business disruption—the costs of credible disclosure. I document the countervailing valuation effects of these benefits and costs, where the net valuation effect depends on whether the company is subsequently acquired. This research is important because it (i) demonstrates the disclosure’s impact on the company through multiple channels, (ii) estimates the valuation effects, and (iii) identifies key considerations for investors and other stakeholders who bear the consequences of such a disclosure.

Keywords: corporate disclosure; strategic alternatives; mergers and acquisitions; disclosure benefits; disclosure costs; information dissemination; shareholder value

JEL Classification: D82, D84, G14, G34, M41

Suggested Citation

Zha Giedt, Jenny, Economic Consequences of Announcing Strategic Alternatives: A Voluntary Disclosure's Benefits and Costs (May 10, 2023). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2695287 or http://dx.doi.org/10.2139/ssrn.2695287

Jenny Zha Giedt (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States

HOME PAGE: http://www.jennyzha.com

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