The Information Value of M&A Press Releases

How do managers comment on merger transactions? By analyzing initial public announcements of Mergers and Acquisitions (M&As) between 1995-2020 and extracting the linguistic sentiment from statements made by acquirer and target firms, we provide new evidence on the information value of M&A disclosures. We find that positive target sentiment leads to positive returns for targets, while sentiment disagreement with the acquirer leads to lower target returns. Further, the positive target sentiment increases the likelihood of a merger completion and leads to a shorter time to deal completion. We decompose acquirer sentiment into manipulative and fundamental components and demonstrate that acquirer CEOs with low confidence and large ownership holdings in the acquirer firm produce M&A statements that are more manipulative. This suggests that sentiment in M&A disclosures not only contains information on fundamentals and managerial attitudes but that it may be manipulated to protect the personal interest of managers