Manager Sentiment and Merger Activities

IF 1.2 Q3 BUSINESS, FINANCE
Brandon Byunghwan Lee, Bo Meng, Nhat Q. Nguyen, Daniel Gyung Paik, Anand M. Vijh
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Abstract

This study investigates the ability of manager sentiment to predict corporate merger activity. Prior research suggests that during periods of high sentiment, managers tend to overestimate the future prospects of their firms. We thus hypothesize that, during such periods, managers may also overestimate the future cash flows from the mergers they undertake. Consistent with this, we find that higher manager sentiment predicts increased merger activities for up to four quarters ahead, and this predictive ability is driven primarily by cash mergers. The result holds at both the market level and the industry level. Additionally, managers finance these cash mergers by issuing debt rather than equity. Furthermore, we find that investors react negatively to mergers initiated during periods of high manager sentiment; however, this result is driven by stock mergers, suggesting that investors may not recognize manager sentiment as a factor driving the increase in cash merger activity. Finally, we demonstrate that the predictive power of manager sentiment on merger activities is distinct from that of manager overconfidence and investor sentiment. Our study contributes to research on behavioral finance and mergers and acquisitions (M&A).

Abstract Image

经理人情绪与并购活动
本研究探讨经理人情绪对企业并购活动的预测能力。先前的研究表明,在情绪高涨的时期,经理们倾向于高估公司的未来前景。因此,我们假设,在这些时期,管理者也可能高估了他们所进行的合并的未来现金流。与此一致的是,我们发现较高的经理情绪预示着未来四个季度合并活动的增加,而这种预测能力主要是由现金合并驱动的。这个结果在市场层面和行业层面都是成立的。此外,管理人员通过发行债券而不是股票为这些现金合并融资。此外,我们发现投资者对经理人情绪高涨时期发起的并购反应消极;然而,这一结果是由股票合并驱动的,这表明投资者可能没有意识到经理人的情绪是推动现金合并活动增加的一个因素。最后,我们证明了经理人情绪对并购活动的预测能力不同于经理人过度自信和投资者情绪。我们的研究有助于行为金融学和并购的研究(M&;A)。
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
CiteScore
2.30
自引率
7.10%
发文量
69
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