Investor Attention and Early Announcements in Mergers and Acquisitions

Abstract

We provide an investor-attention-based interpretation for early announcements, complementing the signalling-based explanation of Aktas et al. (2018). We find that acquiring firms attract substantial investor attention with their early announcements. The positive relationship between early announcement and M&A short-term value effect is more pronounced for early-announced deals with greater investor attention toward deal announcements. However, this relation is reversed after merger integration, leading to a lower long-run firm value. For early-announced deals with low investor attention, neither the boosting effect of short-term value effect nor the price reversal in the long run exists. Our findings support the price pressure hypothesis for early announcements.

Keywords: Mergers, Acquisitions, Investor attention, Early announcement