Expectation Management in Mergers and Acquisitions

• 成果类型: Article
• 署名作者: He, Jie (Jack); Liu, Tingting; Netter, Jeffry; Shu, Tao
• 署名单位: University System of Georgia; University of Georgia; Iowa State University; The Chinese University of Hong Kong, Shenzhen
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2018.3227
• 发表日期: 2020
• 页码: 1205-1226
• 关键词: expectation management; Method of payment; Mergers and Acquisitions; acquisition costs; Earnings surprises

摘要

Takeover bidders in stock-for-stock mergers have strong incentives to increase their own premerger stock prices to lower their acquisition costs. We find that before announcements of stock mergers, bidders manage down analyst earnings forecasts prior to earnings releases. Such expectation management benefits bidders by increasing their own stock prices and saving on acquisition costs. Additionally, analysts who have close relations with stock bidders are more likely to participate in expectation management. For identification, we use an instrumental variable analysis, a pseudo-event analysis, and a propensity score-matching approach. Our paper provides evidence on expectation management as a previously underexplored opportunistic behavior by takeover bidders.