Do Insiders Learn from Outsiders? Evidence from Mergers and Acquisitions
LYZ Capital Advisors LLC
AFA 2004 San Diego Meetings
In a sample of more than 2000 M&As, I find that the market reaction to the initial announcement forecasts whether the companies later consummate the deal. The relation cannot be explained by the market's anticipation of the closing decision or its perception of the deal quality at the announcement. Merging companies appear to extract information from the market reaction and later consider it in closing the deal. Furthermore, the relation varies according to certain deal characteristics as predicted by my model, suggesting that companies have a higher incentive to learn from the market when canceling the announced deal is easier or when the market has more information that the companies do not know.
Note: Previously titled "Do Insiders Learn from Outsiders? Evidence from Corporate Takeovers"
Number of Pages in PDF File: 52
JEL Classification: G34, D8
Date posted: February 21, 2003