The Anchoring Effect in Mergers and Acquisitions: Evidence from an Emerging Market

35 Pages Posted: 26 Jan 2018

See all articles by Anastasia Stepanova

Anastasia Stepanova

HSE University

Vladislav Savelyev

National Research University Higher School of Economics

Malika Shaikhutdinova

National Research University Higher School of Economics

Date Written: January 26, 2018

Abstract

This article examines the presence of the reference price effect in mergers and acquisitions in Russia, which can act as a distortion in investor perception of the influence a deal has on a company. In this study we use the Russian market as a laboratory for the investigation of behavioral effects in a relatively inefficient market. We find a relationship between the acquirer’s announcement period return and the proximity of its pre-announcement share price to the 52-week high. The 52-week high serves as a salient anchor even though it is economically irrelevant for valuation purposes. This effect appears to be stronger for deals associated with higher levels of uncertainty. The findings confirm the presence of the anchoring bias in evaluating the effect of a merger or acquisition announcement by Russian investors. We demonstrate a significant anchoring effect even for deals with a blocking (>10%) or a controlling stake (>25%) in an emerging market with a highly concentrated ownership.

Keywords: Mergers; Acquisitions; Anchoring; Reference point; Behavioral corporate finance

JEL Classification: G34, G41

Suggested Citation

Stepanova, Anastasia N. and Savelyev, Vladislav and Shaikhutdinova, Malika, The Anchoring Effect in Mergers and Acquisitions: Evidence from an Emerging Market (January 26, 2018). Higher School of Economics Research Paper No. WP BRP 63/FE/2018, Available at SSRN: https://ssrn.com/abstract=3110502 or http://dx.doi.org/10.2139/ssrn.3110502

Anastasia N. Stepanova (Contact Author)

HSE University ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Vladislav Savelyev

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Malika Shaikhutdinova

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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