The M&A Rumor Productivity Dip

55 Pages Posted: 19 Jan 2021

See all articles by Christian Andres

Christian Andres

WHU - Otto Beisheim School of Management

Dmitry Bazhutov

BUW - Schumpeter School of Business and Economics

Douglas J. Cumming

Florida Atlantic University

Peter Limbach

University of Cologne and Centre for Financial Research (CFR)

Date Written: December 09, 2020

Abstract

M&A rumors cause anxiety, distraction, and reduced employee morale due to the implicit threat of job loss. Using an international sample of M&A rumors that do not materialize, we show that firm productivity temporarily declines after rumors surface. This productivity dip is more pronounced for target firms and for firms in countries with less employment protection, collective bargaining, and long-term orientation. Stock returns mirror these results, suggesting that rumors destroy shareholder value. The evidence fosters our understanding of the implications of a common phenomenon in financial markets, i.e., rumors, and the dark side of the market for corporate control.

Keywords: Employee rights, Firm productivity, Human capital, M&A rumors, Shareholder value, Threat of job loss

JEL Classification: D24, G00, G34, J24

Suggested Citation

Andres, Christian and Bazhutov, Dmitry and Cumming, Douglas J. and Limbach, Peter, The M&A Rumor Productivity Dip (December 09, 2020). Available at SSRN: https://ssrn.com/abstract=3739509 or http://dx.doi.org/10.2139/ssrn.3739509

Christian Andres (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Dmitry Bazhutov

BUW - Schumpeter School of Business and Economics ( email )

Gaußstraße 20
42097 Wuppertal
Germany

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Peter Limbach

University of Cologne and Centre for Financial Research (CFR) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

HOME PAGE: http://www.finance.uni-koeln.de

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