Do Insiders Learn from Outsiders? Evidence from Mergers and Acquisitions

Posted: 9 Nov 2004

Abstract

I find that the market reaction to an 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.

Suggested Citation

Luo, Yuanzhi, Do Insiders Learn from Outsiders? Evidence from Mergers and Acquisitions. Available at SSRN: https://ssrn.com/abstract=615824

Yuanzhi Luo (Contact Author)

LYZ Capital Advisors LLC ( email )

One Manhattanville Rd
Purchase, NY 10577
United States

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