Information asymmetry, cross-listing, and post-M&A performance.

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Date: Jan. 2021
Publisher: Elsevier B.V.
Document Type: Report; Brief article
Length: 293 words

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Abstract :

Keywords M&As; Stock market predictability; Post-acquisition performance; Information asymmetry; Cross-listing Abstract This study examines how target opaqueness and the acquirer's cross-listing in a developed financial market impact the alignment between the stock market's initial reaction to an M&A deal announcement and the acquirer's post-M&A performance by affecting the level of information asymmetry between acquirers' managers and stock market investors. We hypothesize that target opaqueness weakens, whereas the acquirer's cross-listing enhances, the alignment between the initial stock market reaction and the acquirer's post-acquisition performance. Additionally, the weakening effect of target opaqueness is smaller when the acquirer is cross-listed in a financially more developed market. From a sample of mergers and acquisitions (M&A) deals made by Chinese acquirers, we find that the alignment between the initial stock market reaction and acquirer's post-acquisition performance is weakened when the targets are private, high-tech, or foreign, while being strengthened when the acquirers are cross-listed in Hong Kong stock exchanges. Further, the weakening effects of private, high-tech, or foreign targets are smaller when the acquirers are cross-listed. This study contributes to the M&A literature by examining factors that moderate the alignment between stock market's ex-ante valuation of M&A deals and the ex-post performance of those deals. Author Affiliation: (a) National Research Base of Intelligent Manufacturing Service, Chongqing Technology & Business University, Chongqing 400067, China (b) Haub School of Business, Saint Joseph's University, Philadelphia, PA 19131, USA (c) Southern Illinois University Edwardsville, School of Business, Edwardsville, IL 62026-1100, USA (d) Research Center of the Economy of the Upper Reaches of Yangtze River, Chongqing Technology & Business University, Chongqing 400067, China * Corresponding authors. Article History: Received 19 December 2016; Revised 20 August 2020; Accepted 22 August 2020 Byline: Sangcheol Song [ssong@sju.edu] (a,b,*), Yuping Zeng [yzeng@siue.edu] (c), Bing Zhou [bingzhou@ctbu.edu.cn] (d,*)

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Gale Document Number: GALE|A648491638