Premium
Do Insiders Learn from Outsiders? Evidence from Mergers and Acquisitions
Author(s) -
LUO YUANZHI
Publication year - 2005
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2005.00784.x
Subject(s) - closing (real estate) , anticipation (artificial intelligence) , mergers and acquisitions , incentive , relation (database) , business , perception , quality (philosophy) , monetary economics , marketing , economics , microeconomics , finance , psychology , computer science , philosophy , epistemology , database , artificial intelligence , neuroscience
ABSTRACT I find that the market reaction to a merger and acquisition (M&A) announcement predicts whether the companies later consummate the deal. The relation cannot be explained by the market's anticipation of the closing decision or its perception of the deal quality at the announcement. Merging companies appear to extract information from the market reaction and later consider it in closing the deal. Furthermore, the relation varies with deal characteristics, suggesting that companies seem to have a higher incentive to learn from the market when canceling the announced deal is easier or when the market has more information that the companies do not know.