The Informational Consequences of Good and Bad Mergers

38 Pages Posted: 23 Mar 2021 Last revised: 6 Oct 2022

See all articles by Samer Adra

Samer Adra

University of Sheffield

Leonidas G. Barbopoulos

University of Edinburgh

Date Written: October 4, 2022


We study the information production dynamics in financial markets in response to Mergers and Acquisitions (M&As) announcements. We find that acquirers with low levels of pre-announcement stock price informativeness experience a substantial increase in their corresponding post-announcement stock price informativeness in response to positive Cumulative Abnormal Returns (CAR). We show that this increase is due to the enhanced prospect of deal completion. By contrast, high levels of acquirer pre-announcement stock price informativeness limit traders’ incentives to search for, and acquire, new information. We also find that similar dynamics apply to the changes in acquirers’ analyst coverage. Emphasizing the important role of information acquisition costs in influencing informed trading, a positive acquirer CAR increases the acquiring firm’s post-announcement stock price informativeness in M&As involving public rather than private and subsidiary targets. Overall, we show that M&As have important informational consequences beyond their immediate effects on stock prices.

Keywords: Stock price informativeness; Endogenous information production; Mergers and Acquisitions; Analyst coverage.

JEL Classification: G14, G31, G34

Suggested Citation

Adra, Samer and Barbopoulos, Leonidas G., The Informational Consequences of Good and Bad Mergers (October 4, 2022). Journal of Corporate Finance, Forthcoming, Available at SSRN: or

Samer Adra

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

Leonidas G. Barbopoulos (Contact Author)

University of Edinburgh ( email )

University of Edinburgh Business School
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom

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