Do M&A Delistings Impact U.S. Capital Markets? Evidence of Negative Information Externalities for Industry Peer Firms

55 Pages Posted: 18 Sep 2020

See all articles by Anna Bergman Brown

Anna Bergman Brown

University of Connecticut - Department of Accounting

Donal Byard

City University of New York - Stan Ross Department of Accountancy

Masako N. Darrough

Baruch College - CUNY

Jangwon Suh

New York Institute of Technology

Date Written: August 6, 2020

Abstract

This study examines whether delistings due to mergers and acquisitions (i.e., M&A delistings) result in negative information externalities for industry peer firms. Prior research shows that firms’ disclosures provide useful information spillovers to other firms in the same industry; importantly, M&A delistings decrease the number of listed firms in an industry. We document that M&A delistings are associated with a decrease in the quality of analysts’ information environment (increases in absolute forecast errors and dispersion) for industry peer firms; further, this effect is greater when the delisted target firm is larger relative to its industry. Multiple additional analyses, including a comparison of individual analysts who previously followed the delisted firm with other analysts, and a falsification test using non-completed M&A, indicate that our main results are not due to endogeneity bias from correlated omitted industry shocks. Our results show negative information externalities from M&A delistings that persists for at least three years and provide evidence regarding the broader effects of M&A delistings for U.S. capital markets.

Keywords: M&A Delisting, Negative Information Externality, Analyst Information Environment, Industry Peer Firms, Spillovers

JEL Classification: G14, G18, G34, M40

Suggested Citation

Brown, Anna Bergman and Byard, Donal and Darrough, Masako N. and Suh, Jangwon, Do M&A Delistings Impact U.S. Capital Markets? Evidence of Negative Information Externalities for Industry Peer Firms (August 6, 2020). Available at SSRN: https://ssrn.com/abstract=3668063 or http://dx.doi.org/10.2139/ssrn.3668063

Anna Bergman Brown

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States

Donal Byard (Contact Author)

City University of New York - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States
646-312-3187 (Phone)
646-312-3161 (Fax)

Masako N. Darrough

Baruch College - CUNY ( email )

One Bernard Baruch Way
New York, NY 10010
United States
646 312 3183 (Phone)
646 312 3161 (Fax)

Jangwon Suh

New York Institute of Technology ( email )

1855 Broadway
New York, NY 10023
United States

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