Manager Sentiment, Deal Characteristics, and Takeover Performance

71 Pages Posted: 26 Feb 2020 Last revised: 9 Dec 2022

See all articles by Suwei An

Suwei An

Tilburg University - Tilburg School of Economics and Management; Central University of Finance and Economics (CUFE) - School of Finance

Xiaofen Tan

Central University of Finance and Economics (CUFE)

Kai Wu

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

Date Written: December 8, 2022

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. 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

An, Suwei and Tan, Xiaofen and Wu, Kai, Manager Sentiment, Deal Characteristics, and Takeover Performance (December 8, 2022). Available at SSRN: https://ssrn.com/abstract=3527865 or http://dx.doi.org/10.2139/ssrn.3527865

Suwei An

Tilburg University - Tilburg School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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

Beijing
China

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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