Does the readability of target firms' annual reports matter to bidders?

IF 7.5 1区经济学 Q1 BUSINESS, FINANCE

International Review of Financial Analysis Pub Date : 2025-06-18 DOI:10.1016/j.irfa.2025.104425

Balasingham Balachandran, Robert W. Faff, Kristina Minnick, Syed Shams

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Abstract

This study investigates the impact of target firms' annual report readability on acquirers' negotiation strategies and stock market reactions to mergers and acquisitions (M&A). Higher readability is positively associated with bidders' market reactions and bid premiums and negatively related to the time needed to complete the deal. However, while readability improves market reactions, higher bid premiums reduce these gains. The results are robust, accounting for endogeneity using instrumental variable analysis and sample selection bias through propensity score matching and entropy balancing. The effects of readability on market reactions and bid premiums are more pronounced in non-tender offers, deals involving bidders without top legal teams, and target firms with higher information asymmetry (lower analyst following) and uncertainty (higher R&D intensity). Overall, this study highlights that the readability of target firms' financial reports enhances transparency and signals firm quality, making it an important factor for acquirers in evaluating M&A opportunities.

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目标公司年报的可读性对竞标者来说重要吗？

本研究探讨了目标公司年报可读性对收购方谈判策略和股票市场对并购反应的影响（M&；A）。较高的可读性与竞标者的市场反应和出价溢价呈正相关，与完成交易所需的时间负相关。然而，虽然可读性提高了市场反应，但较高的出价溢价降低了这些收益。结果是稳健的，利用工具变量分析和通过倾向得分匹配和熵平衡的样本选择偏差来考虑内生性。可读性对市场反应和出价溢价的影响在非投标报价、涉及没有顶级法律团队的投标人的交易以及具有较高信息不对称（较低分析师跟随）和不确定性（较高研发强度）的目标公司中更为明显。总体而言，本研究强调，目标公司财务报告的可读性提高了透明度，并标志着公司质量，使其成为收购方评估并购机会的重要因素。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

International Review of Financial Analysis BUSINESS, FINANCE-

CiteScore

10.30

自引率

9.80%

发文量

366

期刊介绍： The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.