Using a sample of mergers and acquisitions from 1985 to 2014, we examine the impact of proximity between target and acquirer as a measure of information asymmetry. We find geographic distance has a significant impact on acquisitions premiums and time to completion, conditional on the size of the target firm. Small targets receive lower premiums and have a faster time to completion the closer they are to their acquirer. Conversely, large targets have a slower time to deal completion the closer their proximity. We conclude geographic distance has a substantial impact on acquisitions.

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We find that changes in managerial tone predict firm corporate investment activities. Tone changes within the Management Discussion and Analysis section of the 10-K are positively related to subsequent capital investments and M&A activity. We find the predictive content of tone changes to be present at the firm and industry-levels, and when accounting for alternative sources of incremental information associated with firm investment activities. Our findings broaden the scope of information encapsulated by changes in financial statement tone.

Purpose The purpose of this paper is to examine the impact firm proximity to financial centers has on announcement returns and time to deal completion for mergers and acquisitions. Design/methodology/approach Using a data set of merger and acquisition activity from 1986 to 2014, target and acquiring firms are classified as rural or urban based on their geographic proximity to major financial centers. The impact of this proximity on short-term acquisition announcement returns and on the amount of time required to complete the transaction are tested. Findings Markets react more favorably to the acquisition of firms headquartered in a rural area, likely due to increased information advantage on the part of the acquiring firm. Furthermore, the acquisition of a rural firm requires greater time to completion. Practical implications Acquiring firms may be able to use information asymmetry to their advantage when acquiring firms located in a more rural setting with higher levels of information asymmetry. However, this requires the acquiring firm to generate an informational advantage and will also require a greater time commitment on average to complete the deal. Originality/value While prior literature has demonstrated that the distance between target and acquirer can affect acquisition returns and time to deal completion, this study adds to the literature by demonstrating that the geographic location of the target firm relative to major financial hubs can have a unique effect on mergers and acquisitions as well.