Learning from the Market as A Motive for Disclosure: The Case of Takeover Announcement Timing

Luo, Yuanzhi

doi:10.2139/ssrn.362640

Cited by 2 publications

(7 citation statements)

References 73 publications

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“…First, Luo (2001) claims that the cancellation cost is higher for deals with formal merger agreements at the announcement (agreement deals) than for those without such agreements (pre‐agreement deals). Some companies announce their deals after they have signed definitive merger contracts, and others announce before such contracts.…”

Section: Testable Hypothesesmentioning

confidence: 99%

“…Luo (2001) claims that most announced M&As in the 1990s are with definitive contracts, and retracting such a deal is often prohibitively expensive. The high penalty makes cancellations rare, regardless of the market reaction.…”

Section: Testsmentioning

confidence: 99%

“…However, the interpretation of Table V test (a) is not consequently changed because learning and the no‐learning predict opposite signs of EarlyAnn × SYNERGY. According to Luo (2001), companies choose early announcement with less commitment (EarlyAnn = 1) when the market possesses more unique information. If learning does not occur, according to Proposition 1, the probit slope will be lower for EarlyAnn = 1 than for EarlyAnn = 0 because more market unique information implies a stronger attenuation effect on the probit slope.…”

Section: Testsmentioning

confidence: 99%

“…13 13 Luo (2001) shows that the effects of H1–H3 are correlated. For example, larger bidders are more likely to have agreement deals. …”

mentioning

confidence: 99%

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Do Insiders Learn from Outsiders? Evidence from Mergers and Acquisitions

Luo

2005

The Journal of Finance

Self Cite

551

131

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I find that the market reaction to a merger and acquisition (M&A) announcement predicts whether the companies later consummate the deal. The relation cannot be explained by the market's anticipation of the closing decision or its perception of the deal quality at the announcement. Merging companies appear to extract information from the market reaction and later consider it in closing the deal. Furthermore, the relation varies with deal characteristics, suggesting that companies seem to have a higher incentive to learn from the market when canceling the announced deal is easier or when the market has more information that the companies do not know. Copyright 2005 by The American Finance Association.

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Section: Testable Hypothesesmentioning

confidence: 99%

Section: Testsmentioning

confidence: 99%

Section: Testsmentioning

confidence: 99%

“…13 13 Luo (2001) shows that the effects of H1–H3 are correlated. For example, larger bidders are more likely to have agreement deals. …”

mentioning

confidence: 99%

See 2 more Smart Citations

Do Insiders Learn from Outsiders? Evidence from Mergers and Acquisitions

Luo

2005

The Journal of Finance

Self Cite

551

131

View full text Add to dashboard Cite

show abstract

“…In contrast, stopping a pre-agreement merger is much easier. In sum, the M&A announcement timing is a proxy for the cancellation cost, and Luo (2001) discusses the topic in more detail.…”

Section: Testable Hypothesesmentioning

confidence: 99%