Manager Sentiment, Deal Characteristics, and Takeover Performance
71 Pages Posted: 26 Feb 2020 Last revised: 9 Dec 2022
Date Written: December 8, 2022
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. Our findings demonstrate that manager sentiment has a strong positive predictive power for takeover activities, and high manager sentiment decreases the long-term performance of takeover deals. Moreover, we show that high-sentiment managers tend to undertake large deals, decrease the all-stock payment, acquire hard-to-value targets, and offer high target valuation, which implies the over-investment channel for the underperformed high-sentiment deals.
Keywords: manager sentiment; deal characteristic; takeover performance; textual analysis
JEL Classification: G34, G30, G02
Suggested Citation: Suggested Citation