The Role of Media in Mergers and Acquisitions

Journal of International Financial Markets, Institutions & Money, forthcoming

41 Pages Posted: 20 Sep 2019 Last revised: 25 Jan 2021

See all articles by Rose C. Liao

Rose C. Liao

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics

Xinjie Wang

Southern University of Science and Technology

Ge Wu

University of Richmond

Date Written: September 13, 2019

Abstract

Using a novel dataset of news events for 170,000 entities across over 100 countries, we find that media sentiment plays an important role in the market for merger and acquisition. Firms with high media sentiment are more likely to become an acquirer. The effect of media on the likelihood of an acquisition is stronger for cross-border deals, larger firms with fewer financial constraints, and firms with higher market-to-book ratio and more media coverage. Acquirers with high media sentiment experience significantly negative returns post-acquisition, inconsistent with theories of media content as a proxy for new information about fundamental asset values.

Keywords: mergers, news, investor sentiment

JEL Classification: G10, G34

Suggested Citation

Liao, Rose C. and Wang, Xinjie and Wu, Ge, The Role of Media in Mergers and Acquisitions (September 13, 2019). Journal of International Financial Markets, Institutions & Money, forthcoming, Available at SSRN: https://ssrn.com/abstract=3456718 or http://dx.doi.org/10.2139/ssrn.3456718

Rose C. Liao (Contact Author)

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

1 Washington Park
Newark, NJ 07102
United States

Xinjie Wang

Southern University of Science and Technology ( email )

1088 Xueyuan Blvd
Xili, Nanshan District
Shenzhen, Guangdong 518055
China

Ge Wu

University of Richmond ( email )

102 UR Drive
Richmond, VA 23173
United States

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