Manager Sentiment, Deal Characteristics, and Takeover Performance

61 Pages Posted: 26 Feb 2020 Last revised: 14 Feb 2021

See all articles by Suwei An

Suwei An

Tilburg University - TIAS School for Business and Society

Xiaofen Tan

Central University of Finance and Economics (CUFE)

Kai Wu

Central University of Finance and Economics (CUFE) - School of Finance

Date Written: February 14, 2021

Abstract

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

An, Suwei and Tan, Xiaofen and Wu, Kai, Manager Sentiment, Deal Characteristics, and Takeover Performance (February 14, 2021). Available at SSRN: https://ssrn.com/abstract=3527865 or http://dx.doi.org/10.2139/ssrn.3527865

Suwei An

Tilburg University - TIAS School for Business and Society ( email )

Warandelaan 2
TIAS Building
Tilburg, Noord Brabant 5037 AB
Netherlands

Xiaofen Tan

Central University of Finance and Economics (CUFE)

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Kai Wu (Contact Author)

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

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