Do Managers Engage in Impression Management before M&A? Evidence from Earnings Communication Conference

Abstract

This study examines the incentives of managers to engage in impression management through earnings communication conferences (ECCs) prior to M&A activities, as well as the subsequent reactions of investors. Our findings reveal that managers have incentives and make efforts to deliver positive signals to individual investors during online ECCs preceding M&A activities. Cross-sectional analyses indicate that these incentives and efforts are restricted in firms with a better information environment, while these are more pronounced in private firms. Furthermore, we find that short-term announcement return is significantly and positively associated with the manager's efforts in impression management during ECCs, suggesting the effectiveness of impression management efforts made by managers. However, the long-term announcement return shows no relationship or even a significantly negative relationship with manager's impression management, indicating potential limitations of these impression management strategies. Overall, this study contributes to the understanding of the incentives for impression management in narrative disclosures and the market reactions within emerging markets.

Keywords: Impression Management, Earnings Communication Conference, Mergers and Acquisitions, Textual analysis