Loading...
The effect of bidder conservatism on M&A decisions: Text-based evidence from US 10-K filings.
Ahmed, Y. Elshandidy, Tamer
Ahmed, Y.
Elshandidy, Tamer
Publication Date
2016-07
End of Embargo
Supervisor
Rights
© 2016 Elsevier. Reproduced in accordance with the publisher's self-archiving policy. This manuscript version is made available under the CC-BY-NC-ND 4.0 license.
Peer-Reviewed
Yes
Open Access status
openAccess
Accepted for publication
20/05/2016
Institution
Department
Awarded
Embargo end date
Collections
Additional title
Abstract
This paper examines whether and how bidders' conservative tone in 10-K filings influences the subsequent mergers and acquisitions (M&A) investment decisions of these US firms from 1996 to 2013. Based on 39,260 firm-year observations, we find, consistent with behavioural consistency theory, that conservative bidders are less likely to engage in M&A deals. Further, those that decide to engage in M&As are likely to acquire public targets and within-industry firms. These bidders are inclined to employ more stock acquisitions than cash acquisitions. Our results also indicate that conservative bidders experience abnormally poor stock returns around the announcements of M&A investments. This provides new insights on the mechanism through which bidders' sentiments influence shareholders' wealth. Overall, these findings highlight the implications of the textual sentiment of corporate disclosure for the forecasting of corporate investment and financing decisions. Our results have practical implications, since they shed light on the value relevance of the information content of major Securities Exchange Commission (SEC)-mandated 10-K filings.
Version
Accepted manuscript
Citation
Ahmed Y and Elshandidy Tamer (2017) The effect of bidder conservatism on M&A decisions: Text-based evidence from US 10-K filings. International Review of Financial Analysis. 46: 176-190.
Link to publisher’s version
Link to published version
Link to Version of Record
Type
Article