Finance Seminar（2018-09）

Topic: Are Market Reactions to M&As Biased by Overextrapolation of Salient News?

Time: Wednesday, 28 March, 10:00-11:30

Location: Room 217, Guanghua Building 2

Abstract:

We 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.

Introduction:

Dr. Eliezer Fich is a professor of Finance in LeBow College of Business, Drexel University. He obtained his Ph.D. in Business Administration (With Honors) from New York University. He holds a B.S. in Mechanical Engineering and a M.S. in Industrial Engineering from Columbia University.

//www.lebow.drexel.edu/people/eliezerfich

Your participation is warmly welcomed!