Similarity perceptions in investor reactions to acquisition announcements

Item Type Journal paper
Abstract

We contribute to an improved understanding of investor reactions to acquisition announcements by building on the recent research in cognitive psychology that distinguishes between the following two types of cognitive similarity assessments: taxonomic and thematic similarity. We theorize and find that investor reactions to taxonomic acquisitions, where synergies are easier to comprehend, are generally more positive than investor reactions to thematic acquisitions, which require higher cognitive processing. We argue that this effect is driven by the cognitive processing of investors, instead of “true” synergy, since the more negative announcement returns for thematic deals reverse a few days after the announcement, converging with the announcement returns of taxonomic deals. Moreover, we find that attempts by the acquiring company to help investors assess thematic acquisitions do not seem to be effective at eliminating this effect and instead appear to aggravate investor suspicion. Overall, our findings contribute to the emerging behavioral perspective of investor reactions to acquisition announcements.

Authors de Groote, Julia K.; Kleindienst, Ingo; Hoegl, Martin; Schweizer, Denis & Laamanen, Tomi
Journal or Publication Title Long Range Planning
Language English
Subjects business studies
social sciences
HSG Classification contribution to scientific community
Refereed Yes
Date 12 December 2019
Publisher Elsevier
ISSN 0024-6301
Publisher DOI 10.1016/j.lrp.2019.101946
Official URL https://www.sciencedirect.com/science/article/pii/...
Depositing User Kata Julianna Isenring-Szabó
Date Deposited 28 Apr 2020 07:59
Last Modified 28 Apr 2020 07:59
URI: https://www.alexandria.unisg.ch/publications/260108

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Citation

de Groote, Julia K.; Kleindienst, Ingo; Hoegl, Martin; Schweizer, Denis & Laamanen, Tomi (2019) Similarity perceptions in investor reactions to acquisition announcements. Long Range Planning, ISSN 0024-6301

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https://www.alexandria.unisg.ch/id/eprint/260108
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