Smart Investments by Smart Money: Evidence from Acquirers’ Projected Synergies

49 Pages Posted: 1 May 2019

See all articles by Ahmad Ismail

Ahmad Ismail

American University of Beirut

Samer Khalil

American University of Beirut

Assem Safieddine

American University of Beirut - Olayan School of Business

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: March 30, 2019

Abstract

Institutional investors tend to accumulate the shares of firms that announce acquisitions. The tendency to accumulate shares is stronger when the acquirer discloses synergy forecasts, and it is especially strong when the disclosed synergies are higher. This evidence is consistent with the idea that institutional investors are attracted to situations where their superior access to management and analysts provides an information advantage. Indeed, this tendency to accumulate information sensitive shares is especially strong for hedge funds, which tend to have the greatest information advantage. Moreover, stock prices respond favorably in the quarter following the acquisition announcement when higher institutional holdings are revealed.

Keywords: Stock Picking; Mergers; Acquisitions; Institutional Investors

JEL Classification: G23, G140

Suggested Citation

Ismail, Ahmad and Khalil, Samer K. and Safieddine, Assem M. and Titman, Sheridan, Smart Investments by Smart Money: Evidence from Acquirers’ Projected Synergies (March 30, 2019). Journal of Corporate Finance, Vol. 56, 2019. Available at SSRN: https://ssrn.com/abstract=3362804

Ahmad Ismail (Contact Author)

American University of Beirut ( email )

Bliss Street
Olayan School of Business
Beirut, POB 11236
Lebanon

HOME PAGE: http://www.aub.edu.lb/osb/publicprofile/Pages/profile.aspx?memberID=ai05

Samer K. Khalil

American University of Beirut ( email )

Suliman S. Olayan School of Business
P.O.Box 11-0236
Beirut 1107 2020, Riad El-Solh
Lebanon

Assem M. Safieddine

American University of Beirut - Olayan School of Business ( email )

Bliss Street
Beirut 1107 2020
Lebanon
961 1 374374 (Phone)

HOME PAGE: http://sb.aub.edu.lb/faculty/nbk.asp

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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