The Impact of Investor Attention on M&A Announcement Target Returns

48 Pages Posted: 14 Jul 2020 Last revised: 22 Sep 2021

See all articles by Toan Luu Duc Huynh

Toan Luu Duc Huynh

Ho Chi Minh City University of Economics and Finance; WHU - Otto Beisheim School of Management

Mei Wang

WHU - Otto Beisheim School of Management

Tim Wimbauer

affiliation not provided to SSRN

Date Written: September 20, 2021

Abstract

We investigate the impact of investor attention, proxied by Google search volume, on target abnormal returns and liquidity measures around M&A announcements. Investor attention slightly increases before and exhibits a sharp incline at the announcement date, with elevated levels of attention subsequent to the announcement. In line with common models of investor attention, we find that investor attention significantly and positively contributes to target abnormal returns at announcement date and leads to timelier incorporation of information, with potential leakage reducing abnormal returns on announcement date. We provide evidence of a share price anomaly as targets which do not attract attention at announcement date have median abnormal returns of more than 4% the following day. High and low attention at announcement date lead to over- and under-reaction in share price returns at announcement date, respectively, either of which is reversed over the subsequent month. Further, liquidity measures improve after M&A announcements, the decrease in bid-ask spread being significantly correlated with attention at announcement. These effects are more profound for smaller targets. The results are robust after controlling for relevant variables and causality concerns.

Keywords: Investor Attention; Merger and Acquisition; Target Returns

JEL Classification: G34

Suggested Citation

Huynh, Toan Luu Duc and Wang, Mei and Wimbauer, Tim, The Impact of Investor Attention on M&A Announcement Target Returns (September 20, 2021). Available at SSRN: https://ssrn.com/abstract=3632596 or http://dx.doi.org/10.2139/ssrn.3632596

Toan Luu Duc Huynh (Contact Author)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Mei Wang

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallender, 56179
Germany

Tim Wimbauer

affiliation not provided to SSRN

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