What’s Really in a Deal? Evidence from Textual Analysis of M&A Conference Calls

45 Pages Posted: 12 Dec 2018 Last revised: 29 Jan 2022

See all articles by Wenyao Hu

Wenyao Hu

Saint Mary's University; Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting

Thomas Shohfi

U.S. Securities and Exchange Commission

Runzu Wang

University of Oklahoma - Division of Finance

Date Written: December 21, 2020

Abstract

Using a sample of 814 transcripts from 2011 to 2018, we examine information within merger and acquisition conference calls. Textual analysis reveals significant differences between the content of M&A call transcripts and both contemporaneous corporate press releases and prior earnings conference calls. We find participation of target executive types in M&A calls occurs more frequently in diversifying acquisitions and is related to payment choice consistent with promoting managerial sector specific skills and incentive alignment, respectively. Retention of participating target executives is associated with a negative market reaction. We also identify a negative relation between textual sentiment and market reaction consistent with a response to higher levels of information asymmetry. Greater quantitative information, however, is positively related to the market reaction of M&A calls. We develop targeted M&A motive dictionaries to identify financial and strategic content within call transcripts. Consistent with prior literature on merger motivation, deals with more finance (strategy) oriented words have a higher (lower) market reaction. Overall, our results show that deal-related textual analysis explains a highly significant and economically important component of gains/losses to acquirers.

Keywords: Acquisitions, Conference Calls, Mergers, Press Releases, Textual Analysis

JEL Classification: G14, G32, G34, M12

Suggested Citation

Hu, Wenyao and Hu, Wenyao and Shohfi, Thomas and Wang, Runzu, What’s Really in a Deal? Evidence from Textual Analysis of M&A Conference Calls (December 21, 2020). Review of Financial Economics (2021) Vol. 39, No.4, pp. 500-521, Available at SSRN: https://ssrn.com/abstract=3292343 or http://dx.doi.org/10.2139/ssrn.3292343

Wenyao Hu

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting ( email )

Pittsburg Building 2000
110, 8th street
Troy, NY 12180
United States

Saint Mary's University ( email )

923 Robie Street
Halifax, Nova Scotia B3H 3C3
Canada

HOME PAGE: http://wenyaohu.com

Thomas Shohfi (Contact Author)

U.S. Securities and Exchange Commission ( email )

Washington, DC
United States

HOME PAGE: http://shohfi.com/

Runzu Wang

University of Oklahoma - Division of Finance ( email )

Norman, OK 73019
United States

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