Cookies

We use cookies to ensure that we give you the best experience on our website. By continuing to browse this repository, you give consent for essential cookies to be used. You can read more about our Privacy and Cookie Policy.


Durham Research Online
You are in:

Uncertainty triggers overreaction : evidence from corporate takeovers.

Black, E.L. and Guo, M. and Hu, N. and Vagenas-Nanos, E. (2017) 'Uncertainty triggers overreaction : evidence from corporate takeovers.', European journal of finance., 23 (14). pp. 1362-1389.

Abstract

Behavioural finance models suggest that under uncertainty, investors overweight their private information and overreact to it. We test this theoretical prediction in an M&A framework. We find that under high information uncertainty, when investors are more likely to possess firm-specific information, acquiring firms generate highly positive and significant gains following the announcement of private stock and private cash acquisitions (positive news) while the market heavily punishes public stock (negative news) deals. On the other hand, under conditions of low information uncertainty, when investors do not possess private information, the market reaction is complete (i.e. zero abnormal returns) irrespective of the type of acquisition. Overall, we provide empirical evidence that shows that information uncertainty plays a significant role in explaining short-run acquirer abnormal returns.

Item Type:Article
Full text:(AM) Accepted Manuscript
Download PDF
(560Kb)
Status:Peer-reviewed
Publisher Web site:https://doi.org/10.1080/1351847X.2016.1202296
Publisher statement:This is an Accepted Manuscript of an article published by Taylor & Francis Group in The European Journal of Finance on 04/07/2016, available online at: http://www.tandfonline.com/10.1080/1351847X.2016.1202296.
Date accepted:08 June 2016
Date deposited:19 August 2016
Date of first online publication:04 July 2016
Date first made open access:04 January 2018

Save or Share this output

Export:
Export
Look up in GoogleScholar