Do Stock Analysts Influence Merger Completion? An Examination of Postmerger Announcement Recommendations

Becher, David A.; Cohn, Jonathan B.; Juergens, Jennifer L.

doi:10.1287/mnsc.2014.2065

Cited by 54 publications

(19 citation statements)

References 38 publications

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“…The presence of external participants in the pre-deal process can influence deal closure in multiple ways. Financial analysts have been found to play an important role in increasing or decreasing the likelihood of M&A closure with their recommendations (Becher, Cohn, & Juergens 2015). Legal advisors are typically involved in public takeover processes and can have a major impact on the likelihood that an agreement is reached on favorable terms for both parties and the time that it takes to close a deal (Krishnan & Masulis, 2013; Westbrock, Muehlfeld, & Weitzel, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

The Pre-Deal Phase of Mergers and Acquisitions: A Review and Research Agenda

Welch

Pavićević

Keil

et al. 2019

Journal of Management

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Despite the long-standing research interest in the pre-deal phase of mergers and acquisitions, many important questions remain unanswered. We review and synthesize the extensive but rather fragmented research on this topic area in the fields of management, finance, accounting, and economics. We organize our review according to six themes, that is, deal initiation, target selection, bidding and negotiation, valuation and financing, announcement, and closure, which represent the main categories of activities performed during the pre-deal phase. Our review shows that most of the existing research relies on a rather high-level, simplified, and static conception of the pre-deal phase. On the basis of our review, we put forward a research agenda that calls for a more granular examination of individual activities and decisions, a more comprehensive analysis of the interplay among the different actors involved in the pre-deal phase, a better understanding of the role of the temporal dynamics, and the extension of the theoretical base from variance-based to process-based theorizing.

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Section: Literature Reviewmentioning

confidence: 99%

The Pre-Deal Phase of Mergers and Acquisitions: A Review and Research Agenda

Welch

Pavićević

Keil

et al. 2019

Journal of Management

View full text Add to dashboard Cite

show abstract

“…In addition, a greater differential in acquirer-target status also predicts a higher probability of deal completion and greater post-acquisition performance. Similarly, Becher, Cohn, and Juergens (2015) examine the role of analyst recommendations on the likelihood of M&A deal completion and post-merger performance.…”

Section: Five Domains Of Analyst Researchmentioning

confidence: 99%

“…In addition, a greater differential in acquirer–target status also predicts a higher probability of deal completion and greater postacquisition performance. Similarly, Becher, Cohn, and Juergens (2015) examine the role of analyst recommendations on the likelihood of M&A deal completion and postmerger performance. Analyzing more than 5,000 merger announcements, they find that the number of positive postmerger stock recommendations issued by analysts for the acquiring firm increases the likelihood of deal completion, while the likelihood of deal completion is lowered by a greater number of favorable postmerger stock recommendations for the target firm.…”

Section: Review and Synthesis Of Analyst Research In Managementmentioning

confidence: 99%

Analyzing Analyst Research: A Review of Past Coverage and Recommendations for Future Research

Bräuer

Wiersema

2017

Journal of Management

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As visible and knowledgeable experts who constantly collect, analyze and disseminate information about the future prospects of publicly listed firms, financial analysts fulfill an important information brokerage and monitoring function for investors. By providing investment advice, financial analysts also influence the demand for a firm's stock and thus its price.Executives pay close attention to financial analysts' earnings forecasts and recommendations, so much so that they are frequently criticized for excessive focus on their forecasts at the expense of the long-term interests of the firm. But while research on analysts in strategic management is steadily growing, we lack a coherent understanding of the extent and nature of analysts' diverse influences on executives' and investors' decision-making, and the context in which analysts operate. This is largely due to the fragmentation of the literature and the absence of prior reviews or meta-analyses of the topic. By organizing, synthesizing and analyzing extant research efforts on analysts in the various domains of strategic management research, we aim to advance our knowledge on the influence of analysts on firms and investors. Further, we hope that our analyses and recommendations help further increase research coverage on this important organizational stakeholder.

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“…Next, we examine how acquirers' earnings management affects the possibility of the merger deal to be withdrawn. Becher et al (2015) show that analysts' unfavorable stock recommendation decreases the probability of merger completion caused partially by the target shareholders' reconsidering the merger offer. Since lowered earnings may be interpreted as a sign of the acquirer's low profitability, it is likely for target shareholders to block a deal (Moeller 2005) or for the acquirer's stockholders to withdraw for fear of further negative impact of purchasing the target on their earnings and stock price (Aktas et al 2016; Bates and Lemmon 2002).…”

Section: Hypothesismentioning

confidence: 96%

Deferred Gratification: Acquirers' Earnings Management during the Interim Period of Acquisitions.

Lu¹

2020

Preprint

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This study investigates the pattern of acquirers' earnings management over the period between the acquisition announcement and the deal completion. This window is longer than a quarter on average and potentially is a hotbed for earnings management. Acquirers manage their earnings downwards in this event window. This temporary decline in earnings is positively correlated with the hike of earnings immediately after the deal completion. This effect is accentuated for stock-for-stock deals. Consistent with managerial incentive as a factor for earnings management, we find that this earnings management is negatively correlated with earnings surprises, is higher when announcement return is lower, and is higher when manager compensation is more sensitive to share prices. Further analysis reports that acquirer's temporary interim-period earnings understatement does not relate to the likelihood of a deal completion or the long-term performance. This study highlights a reverse trend of downward earnings management and the acquirer's influence on both acquirer and target to lower earnings during the interim period, in hopes of boosting postmerger earnings and retrospectively justifying the merger deal.

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Do Stock Analysts Influence Merger Completion? An Examination of Postmerger Announcement Recommendations

Cited by 54 publications

References 38 publications

The Pre-Deal Phase of Mergers and Acquisitions: A Review and Research Agenda

The Pre-Deal Phase of Mergers and Acquisitions: A Review and Research Agenda

Analyzing Analyst Research: A Review of Past Coverage and Recommendations for Future Research

Deferred Gratification: Acquirers' Earnings Management during the Interim Period of Acquisitions.

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