M&A Rumors about Unlisted Firms

42 Pages Posted: 21 Apr 2021 Last revised: 1 Sep 2021

See all articles by Yan Alperovych

Yan Alperovych

EMLYON Business School

Douglas J. Cumming

Florida Atlantic University

Veronika Czellar

SKEMA Business School

Alexander Peter Groh

EMLYON Business School

Date Written: November 12, 2020

Abstract

We examine an international sample of 68,044 completed, or envisaged but abandoned, M&A transactions involving unlisted targets to determine the effect of transaction rumors on deal-closing propensity and transaction value. Our focus on unlisted firms eliminates the problem of the groundless M&A rumors that are sometimes spread in public stock markets for trading purposes. Addressing the impact of rumors is challenging because (i) rumors may be spread on purpose or may emerge accidentally; (ii) they may be caused by the same observable and omitted drivers that also effect deal closing and transaction value; and (iii) transaction values are only observable for completed deals and there is no regulatory requirement to disclose this information. We apply indirect inference methodology to overcome these challenges. Our analyses reveal that (1) M&A rumors are deal breakers; (2) rumored deals have higher transaction values if they do actually manage to close; and (3) the combined economic impact of M&A rumors as deal breakers and as value drivers is strongly negative – M&A rumors destroyed 32% of the aggregated transaction value of our sample.

Keywords: Mergers, Acquisitions, Rumors, Unlisted Firms

JEL Classification: G12, G14, G18, K22

Suggested Citation

Alperovych, Yan and Cumming, Douglas J. and Czellar, Veronika and Groh, Alexander Peter, M&A Rumors about Unlisted Firms (November 12, 2020). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3829554

Yan Alperovych

EMLYON Business School ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Veronika Czellar

SKEMA Business School ( email )

5 quai Marcel Dassault
Suresnes, 92156
France

Alexander Peter Groh (Contact Author)

EMLYON Business School ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

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