Manager Sentiment, Deal Characteristics, and Takeover Performance
61 Pages Posted: 26 Feb 2020 Last revised: 14 Feb 2021
Date Written: February 14, 2021
Extensive literature has discussed the driving forces of takeover activities, including investor sentiment, liquidity, and fundamental shocks. We examine how manager sentiment affects takeover characteristics and long-term performance using data from textual analysis based on 10-K and 10-Q filings. We find that manager sentiment has a strong positive predictive power for takeover activities. Firms with high manager sentiment tend to acquire large and private targets and complete deals with large sizes. Moreover, high manager sentiment is associated with less stock payment, fewer days of completion, and higher bidding premiums. Our findings demonstrate that high manager sentiment decreases the quality and long-term performance of takeover deals, and the results do not hold for acquisitions of public targets.
Keywords: manager sentiment; deal characteristic; takeover performance; textual analysis
JEL Classification: G34, G30, G02, C58
Suggested Citation: Suggested Citation