Adra, S. orcid.org/0000-0002-0187-2607, Barbopoulos, L.G. and Saunders, A. (2024) The fed information shocks and the market for corporate control: predictive and causal effects. Journal of Corporate Finance. 102681. p. 102681. ISSN 0929-1199
Abstract
We show that contractionary monetary shocks, when reflecting a positive macroeconomic assessment by the Federal Reserve (hereafter “Fed”), predict an economic environment that is characterized by (a) a rise in M&A activity, (b) a higher likelihood of M&A completion, (c) higher bidder gains, (d) limited concerns about M&A overpayment, and (e) higher premia offered by foreign bidders to U.S. targets. Further, Fed information shocks have a standalone and direct causal effect on market expectations of M&A gains. That is, positive Fed information shocks trigger a positive revaluation of pending M&A. This revaluation effect, which holds after controlling for macroeconomic conditions and changes in economic forecasts, is more pronounced in deals that are relatively large, financed with stock, and have received a negative market reaction at the M&A announcement period. Overall, our results highlight the independent and credible signaling role of the Fed in the realm of M&A.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2024 The Authors. Except as otherwise noted, this author-accepted version of a journal article published in Journal of Corporate Finance is made available via the University of Sheffield Research Publications and Copyright Policy under the terms of the Creative Commons Attribution 4.0 International License (CC-BY 4.0), which permits unrestricted use, distribution and reproduction in any medium, provided the original work is properly cited. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/ |
Keywords: | Banking, Finance and Investment; Commerce, Management, Tourism and Services |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 11 Nov 2024 11:25 |
Last Modified: | 11 Nov 2024 11:25 |
Status: | Published |
Publisher: | Elsevier BV |
Refereed: | Yes |
Identification Number: | 10.1016/j.jcorpfin.2024.102681 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:219422 |
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