Journal
JOURNAL OF INTERNATIONAL FINANCIAL MARKETS INSTITUTIONS & MONEY
Volume 74, Issue -, Pages -Publisher
ELSEVIER
DOI: 10.1016/j.intfin.2021.101299
Keywords
Mergers; Media; Investor sentiment; Governance
Categories
Funding
- Southern University of Science and Technology [Y01246210, Y01246110]
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Companies with high media sentiment are more likely to become acquirers and pay higher deal premiums, especially in cross-border deals, countries with higher governance standards, larger firms with fewer financial constraints, higher market-to-book ratio, and more media coverage. Target firms typically have low media sentiment.
Using a novel dataset of news events for 170,000 entities across over 100 countries, we examine how media sentiment could affect firm acquisition decisions. Studying 77,552 completed merger and acquisition (M&A) deals around the world from 2000 to 2015, we find that firms with high media sentiment are more likely to become an acquirer and to pay a higher deal premium. The effect of media on the likelihood of an acquisition is stronger for cross-border deals, in countries with higher governance standards, larger firms with fewer financial constraints, and firms with higher market-to-book ratio and more media coverage. Target firms typically have low media sentiment. Acquirers with high media sentiment experience significantly positive returns prior to acquisitions and negative returns post-acquisition, inconsistent with theories of media content as a proxy for new information about fundamental asset values. Overall, we show that the media play an important role in the market for M&As. (C) 2021 Elsevier B.V. All rights reserved.
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