Is There Information in Corporate Acquisition Plans?

90 Pages Posted: 25 Feb 2024 Last revised: 10 Mar 2024

See all articles by Sinan Gokkaya

Sinan Gokkaya

Department of Finance, Ohio University

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: February 22, 2024

Abstract

For many firms, the acquisition process begins with the development of an acquisition plan that is communicated to investors. We construct a comprehensive sample of acquisition plans to provide novel perspectives on the acquisition process and find that acquisition plans are informative to investors and incrementally predict subsequent acquisition activity. These results are more pronounced for firms announcing their commitment to acquisitions from an internal pipeline. Acquisition plans improve acquisition performance due to learning from market feedback and alleviate acquisition-related market uncertainty. Communication of acquisition plans does not increase takeover premiums but is less common in more competitive industries.

Keywords: Mergers, acquisitions, acquisition plans, acquisition pipeline, acquisition performance, acquisition likelihood, market feedback

JEL Classification: G30, G34, G14, G24

Suggested Citation

Gokkaya, Sinan and Liu, Xi and Stulz, Rene M., Is There Information in Corporate Acquisition Plans? (February 22, 2024). Fisher College of Business Working Paper No. 2024-03-004, Charles A. Dice Center Working Paper No. 2024-04, European Corporate Governance Institute – Finance Working Paper No. 966/2024, Available at SSRN: https://ssrn.com/abstract=4736763 or http://dx.doi.org/10.2139/ssrn.4736763

Sinan Gokkaya

Department of Finance, Ohio University ( email )

207 Muck College of Business
Athens, OH 45701
United States

HOME PAGE: http://business.ohio.edu/about/faculty-staff/gokkaya-sinan/

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration ( email )

Oxford, OH 45056
United States

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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