Investor Inattention and Managerial Opportunism – Evidence from Mergers and Acquisitions

34 Pages Posted: 28 May 2020

See all articles by Muhammad Farooq Ahmad

Muhammad Farooq Ahmad

SKEMA Business School – Université Côte d'Azur

Helen Bollaert

SKEMA Business School

Date Written: April 30, 2020

Abstract

We use the unique setting of Malaysian mergers and acquisitions (M&A) activity to test the effect of market-wide investor inattention when managers are attentive. During Ramadan, mainly Muslim investors are likely to be distracted while mainly non-Muslim managers are likely to be attentive and potentially opportunistic. We formulate hypotheses to disentangle opportunistic and non-opportunistic manager behavior. Our results support the distracted investors-opportunistic managers hypothesis. We find that during Ramadan:

(1) aggregate M&A activity is higher,

(2) the probability of deal completion is higher,

(3) time to completion is lower,

(4) managers fail to listen to the market,

(5) announcement returns are higher and

(6) post merger performance is lower.

Keywords: Mergers and Acquisitions, Corporate Governance, Islamic Finance, Behavioral Finance

JEL Classification: G34, G41

Suggested Citation

Ahmad, Muhammad Farooq and Bollaert, Helen, Investor Inattention and Managerial Opportunism – Evidence from Mergers and Acquisitions (April 30, 2020). Available at SSRN: https://ssrn.com/abstract=3589309 or http://dx.doi.org/10.2139/ssrn.3589309

Muhammad Farooq Ahmad

SKEMA Business School – Université Côte d'Azur ( email )

Campus de Lille, Avenue Willy Brandt,
Lille, 59777
France

HOME PAGE: http://sites.google.com/site/mfarooqahmad85

Helen Bollaert (Contact Author)

SKEMA Business School ( email )

Avenue Willy Brandt
Euralille, 59777
France

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