Implications of mergers and acquisitions for information disclosures in earnings calls

Abstract

We examine the linkages between firms' M&A activity and the information exchange between executives and analysts during quarterly earnings calls. Prior M&A research has mostly focused on the considerations presented by information asymmetry between buyers and sellers themselves in M&A. However, these concerns also exist between the buying firm's executives and capital markets. We examine whether firms' M&A activity results in an information exchange between executives and analysts that highlights corporate strategy as a discussion topic. Thus, we test whether there is consistency between firms' corporate growth agendas and the information released to the public by these firms. This question is relevant, as disclosure is central to firms' ability to raise capital and compete. We also investigate the degree to which these information exchanges affect analysts' earnings forecast errors.