1. Dispersion in news sentiment and M&As outcomes.
- Author
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Chen, Yugang, Lu, Jihua, Ma, Weidong, Kumar, Satish, and Shahab, Yasir
- Abstract
We suggest that dispersion in news sentiment, representing the dispersion in informative M&A performance forecasts, effectively captures M&A information uncertainty, disseminates information about transaction risks, and enhances investors' ability to discern high-risk acquisition attempts. We find that consistent with the information uncertainty perspective, dispersion in news sentiment is associated with higher change in the acquirer's information uncertainty, lower M&A announcement return, and lower M&A completion probability. Examining the underlying channel, we show that media reduces information asymmetry between managers and investors and managers listen to the market due to the loss of reputational capital. Our findings are robust to additional analysis, endogeneity test, and robustness check. Overall, we argue that media can function as an alternative channel for corporate governance through dispersion in news sentiment. [Display omitted] • Dispersion in news sentiment (DNS) increases the acquirer's information uncertainty. • DNS reduces M&A announcement return and M&A completion probability. • This negative link is strong for acquirers with low average in news sentiment and larger size. • Acquirer's political connection can suppress DNS when the M&A deal is covered by government-controlled media. • Acquirer's political connection can suppress DNS when the M&A deal is covered by local media. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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