Limited Attention and M&A Announcements

Posted: 20 Feb 2016

See all articles by Tomas Reyes

Tomas Reyes

Pontifical Catholic University of Chile

Date Written: December 1, 2015


Retail investors' attention to mergers and acquisitions is analyzed using measurements based on Internet search volume indexes for publicly traded companies' ticker symbols supplemented by data from news databases. Attention is found not to be instantaneous upon the public announcement of a merger but rather spread over a period surrounding the announcement date. Investors pay attention to a firm and demand information about it as the announcement date approaches, on announcement day itself, and for several days afterwards. More importantly, using instrumental variables it is shown that when news coverage is extensive and retail investors show high abnormal attention to the companies involved in a merger on announcement day, the returns of those companies the day after announcement are greater. This effect is strongest among firms with high standard deviations and betas, and partially reverses over the following months.

Keywords: mergers and acquisitions, limited attention, event study, revaluation

JEL Classification: G14, G34, D82

Suggested Citation

Reyes, Tomas, Limited Attention and M&A Announcements (December 1, 2015). Available at SSRN:

Tomas Reyes (Contact Author)

Pontifical Catholic University of Chile ( email )

Vicuna Mackenna 4860
Santiago, RM 7820436


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