Manager Sentiment, Deal Characteristics, and Takeover Performance

Literature has extensive discussions on the driving forces of takeover activities, including investor sentiment, liquidity, and fundamental shocks. We examine how manager sentiment affects takeover characteristics and long-term performance by using data constructed from textual analysis based on 10-K and 10-Q filings. We find that manager sentiment has a strong positive predictive power for takeover waves. Firms with high manager sentiment tend to acquire large and private targets and complete deals with larger sizes, more cash payment, fewer days of completion, and higher bidding premiums. Overall, our findings demonstrate that high manager sentiment decreases the quality and long-term performance of takeover deals