Investor attention and market reactions to early announcements in mergers and acquisitions

We focus on the market reaction to early announcements in mergers and acquisitions and find that acquiring firms attract substantial investor attention with their early announcements. The positive relationship between early announcements and takeover short-term value effect is more pronounced for early-announced deals with greater investor attention toward deal announcements. However, this relation is reversed after merger integration, leading to a lower long-run firm value. For early-announced deals with low investor attention, neither the boosting effect of short-term value effect nor the price reversal in the long run exists. Our findings support the price pressure hypothesis for early announcements.

Automated summary

The study finds that early announcements in mergers and acquisitions attract significant investor attention, and have a positive impact on the short-term value effect of the deals. However, this relationship is reversed after merger integration, resulting in a lower long-term firm value. For early-announced deals with low investor attention, neither the short-term value effect nor the long-term price reversal exists.