Merger Rhetoric and the Credibility of Managerial Synergy Forecasts

56 Pages Posted: 18 Sep 2020

See all articles by Désirée-Jessica Pély

Désirée-Jessica Pély

Ludwig Maximilian University of Munich (LMU)

Daniela Stephanie Schoch

EMLYON Business School; Ludwig Maximilian University of Munich (LMU)

Date Written: August 5, 2020

Abstract

Managers frequently project high synergistic gains when announcing M&As. This paper analyzes when promised synergies are value-relevant. Using text analytical methods, we only find a positive relationship between synergy projections and announcement returns when promised numerical projections are credible, e.g., when accompanied by thorough verbal explanations and low impression management. Further, credibility increases when concrete instead of embellishing language is used. Hence, the more precise the information that firms disclose, the more it fosters trust in the underlying logic of the deal. Generally, investors seem to see through vacuous statements and value substance over form and verboseness of M&A announcements.

Keywords: mergers and acquisitions, synergies, management forecasts, textual analysis

JEL Classification: G14, G17, G34

Suggested Citation

Pély, Désirée-Jessica and Schoch, Daniela Stephanie, Merger Rhetoric and the Credibility of Managerial Synergy Forecasts (August 5, 2020). Available at SSRN: https://ssrn.com/abstract=3667797 or http://dx.doi.org/10.2139/ssrn.3667797

Désirée-Jessica Pély (Contact Author)

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Daniela Stephanie Schoch

EMLYON Business School ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

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