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Stock price informativeness on the sensitivity of strategic M&A investment to Q
Journal article   Peer reviewed

Stock price informativeness on the sensitivity of strategic M&A investment to Q

Wenjing Ouyang and Samuel H. Szewczyk
Review of quantitative finance and accounting, v 50(3), pp 745-774
01 Apr 2018
DOI: https://doi.org/10.1007/s11156-017-0645-x

Abstract

Business & Economics Business, Finance Social Sciences
Using a strategic merger sample that covers the period from 1985 to 2011, we find that the acquirer's stock price firm-specific information, the new information created by investors about the value of firm fundamentals, increases the positive sensitivity of strategic merger investment to the acquirer's Q; the target's stock price firm-specific information increases the negative sensitivity of merger investment to the target's Q. These results suggest that managers learn from financial markets in identifying strategic merger investment opportunities by transferring assets from poorly managed firms to well managed firms. In addition, the target's stock price firm-specific information itself increases the acquisition size, indicating that informed acquirer managers are more likely to take out large merger investment. Last but not the least, stock price informativeness increases merger synergies and post-merger performance, suggesting that informed managers make better merger investment that increases shareholder value. Our study contributes to the recent increasing stream of studies on managerial learning from the market.

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11 citations in Web of Science
10 citations in Scopus

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Collaboration types
Domestic collaboration
Web of Science research areas
Business, Finance
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