Investor Sentiment and Bidder Announcement Abnormal Returns

Jo Danbolt, Antonios Siganos, Evangelos Vagenas-Nanos

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

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.
Original languageEnglish
Pages (from-to)164-179
JournalJournal of Corporate Finance
Volume33
Early online date25 Jun 2015
DOIs
Publication statusPublished - Aug 2015

Keywords / Materials (for Non-textual outputs)

  • Mergers
  • Bidder
  • Announcement returns
  • Behavioral finance
  • Investor sentiment

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