Investor sentiment and bidder announcement abnormal returns

Danbolt, J., Siganos, A. and Vagenas-Nanos, E. (2015) Investor sentiment and bidder announcement abnormal returns. Journal of Corporate Finance, 33, pp. 164-179. (doi: 10.1016/j.jcorpfin.2015.06.003)

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We introduce the significance of a direct sentiment proxy as an explanatory variable of bidder announcement returns. We argue that sentiment subconsciously influences investor perception of potential merger synergies and risks, and therefore relates to bidder abnormal returns. We proxy daily sentiment based on Facebook status updates across seventeen international markets and show that there is a positive relation between sentiment and bidder announcement returns. In line with behavioral literature stating that sentiment more heavily influences uninformed traders, this relation is more pronounced in acquisitions with a low percentage of blockholder ownership, acquisitions of US public targets, and acquisitions of large targets relative to the size of the bidders. Our study goes beyond the conventional sentiment and stock market returns literature, uncovering a significant relation between sentiment and firm-specific abnormal returns to acquiring companies.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Vagenas-Nanos, Professor Evangelos and Siganos, Professor Antonios
Authors: Danbolt, J., Siganos, A., and Vagenas-Nanos, E.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Journal of Corporate Finance
Publisher:Elsevier B.V.
ISSN (Online):1872-6313
Published Online:25 June 2015
Copyright Holders:Copyright © 2015 Elsevier B.V.
First Published:First published in Journal of Corporate Finance 33:164-179
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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