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Analysts' forecast revisions and informativeness of the acquirer's stock after M&A transactions

de La Bruslerie, Hubert (2015-06), Analysts' forecast revisions and informativeness of the acquirer's stock after M&A transactions, 24th European Financial Management Association Annual Meeting - EFMA 2015, 2015-06, Amsterdam, Netherlands

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EFMA2015_0171_fullpaper.pdf (950.3Kb)
Type
Communication / Conférence
Date
2015-06
Conference title
24th European Financial Management Association Annual Meeting - EFMA 2015
Conference date
2015-06
Conference city
Amsterdam
Conference country
Netherlands
Pages
61
Metadata
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Author(s)
de La Bruslerie, Hubert
Dauphine Recherches en Management [DRM]
Abstract (EN)
Are mergers and acquisitions significant events that develop informativeness? Is the informativeness process the same in different countries? Looking only at cumulative abnormal returns (CARs) is insufficient and the results are sometimes contradictory. To answer to these questions we use the concept of informativeness to assess whether acquisitions improve the private information content of stock prices. We consider a sample of mergers and acquisitions in the US and Europe over the 2000–2013 period. We gauge informativeness by using different measures. First, we refer to the use of the synchronicity measure introduced by Roll (1988). We also refer to Amihud’s (2002) illiquidity ratio and the Llorente et al.’s (2002) measure of informed trading to proxy informativeness. We relate these three measures to the analysts’ activity to forecast EPS. We show that the disclosure process is partially linked to the sign and magnitude of the acquirer’s abnormal return (CARs) at the announcement date. Informativeness of the stock price does not improve systematically between before and after the acquisition. It changes asymmetrically depending on the upward or downward forecast revisions after the acquisition.
Subjects / Keywords
Analysts; Earning forecasts; Forecast revision; Price informativeness; Synchronicity; Cumulative Abnormal Returns (CARs); Acquisitions
JEL
G14 - Information and Market Efficiency; Event Studies; Insider Trading
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance

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