Book
The Real Effects of Trend-Seeking and Extrapolation: Evidence from M&As
SSRN
2021
Abstract
We study earnings surprises disclosed hours before M&A announcements in which both merging firms operate in the same 1-digit SIC as the earnings-releasing firms. These surprises correlate with the acquirers’ M&A announcement return. Consistent with behavioral theory, one week after the M&A announcement, acquirers’ response to the earnings surprises disappears. While acquirers’ stock misvaluation is transitory, other effects to the M&A process are permanent. Larger earnings surprises are related to increases in bid competition, in takeover premiums, and in withdrawn M&As. These results indicate that behavioral biases, characterized by trend-seeking and extrapolation, generate material distortions in some M&A transactions
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Details
- Title
- The Real Effects of Trend-Seeking and Extrapolation
- Creators
- Eliezer M FichGuosong Xu
- Publisher
- SSRN
- Number of pages
- 1 Online-Ressource (59 p)
- Resource Type
- Book
- Language
- English
- Academic Unit
- Finance
- Identifiers
- 991020542328304721