News, Strategic Advertising and Corporate Finance
Saturday, Jan. 5, 2019 2:30 PM - 4:30 PM
- Chair: David Reeb, National University of Singapore
Are Market Reactions to M&As Biased by Overextrapolation of Salient News?
AbstractWe study earnings surprises involving firms in a takeover target’s 1-digit SIC released hours before the M&A public announcement. We find that these surprises correlate with the acquirers’ M&A announcement return, but not with the returns to 4-digit SIC matched bidder and target peer firms. A week after the M&A announcement, acquirers exhibit a stock price reversal and their response to the earnings surprises disappears. We cannot reconcile these findings with rational Bayesian updating, information transmission, or strategic timing theories. The evidence that salient events affect investors’ M&A valuations, supports behavioral theories predicting asset pricing distortions due to cognitive biases.
CEO Turnover: Cross-Country Effects
AbstractCorporate boards and their firms’ managers face different environments across countries, including variations in cultural, legal, and regulatory attributes. These variations suggest that the board’s CEO contracting and monitoring process should differ as well. Using CEO turnover across countries as a measure of this process, we find that similar to the U.S., CEO turnover is related to firm performance in many but not all countries. We also find that the turnover varies systematically with country characteristics
- G3 - Corporate Finance and Governance
- K4 - Legal Procedure, the Legal System, and Illegal Behavior