Journal
JOURNAL OF FINANCIAL ECONOMICS
Volume 110, Issue 1, Pages 1-17Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jfineco.2013.06.003
Keywords
Media; Capital allocation; Acquisition; Corporate governance
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Using 636 large acquisition attempts that are accompanied by a negative stock price reaction at their announcement (value-reducing acquisition attempts) from 1990 to 2010, we find that, in deciding whether to abandon a value-reducing acquisition attempt, managers' sensitivity to the firm's stock price reaction at the announcement is influenced by the level and the tone of media attention to the proposed transaction. We interpret the results to imply that managers have reputational capital at risk in making corporate capital allocation decisions and that the level and tone of media attention heighten the impact of a value-reducing acquisition on the managers' reputational capital. To the extent that value-reducing acquisition attempts are more likely to be abandoned, the media can play a role in aligning managers' and shareholders' interests. (c) 2013 Elsevier B.V. All rights reserved.
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