Wednesday, November 23, 2011
More turkey time reading! Ahern and Sosyura have an interesting finance, Who Writes the News? Corporate Press Releases During Merger Negotiations, examing strategies acquires might be using to run up stock prices in the short term before announcement of an acquisition. It's an interesting issue.
Abstract: Firms have an incentive to manage media coverage to influence the outcome of important corporate events. We investigate this hypothesis by studying corporate press releases during mergers. Using comprehensive data on media coverage and novel data on merger negotiations, we find that bidders in stock mergers originate substantially more news stories after the start of merger negotiations, but before the public announcement. This strategy generates a short-lived run-up in bidders’ stock prices during the period when the stock exchange ratio is determined. The run-up and reversal in media coverage and stock prices cannot be explained by merger rumors, passive media management, or opportunistic merger timing. Overall, we present the first evidence on active media management in M&A.