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Similarity perceptions in investor reactions to acquisition announcements

Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avisTidsskriftartikelForskningpeer review

DOI

  • Julia Froehlich, University of Bern, Schweiz
  • Ingo Kleindienst
  • Martin Hoegl, LMU Muenchen, Tyskland
  • Denis Schweizer, Concordia University, Canada
  • Tomi Laamanen, University of St. Gallen, Schweiz

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.

OriginalsprogEngelsk
Artikelnummer101946
TidsskriftLong Range Planning
Vol/bind54
Nummer1
ISSN0024-6301
DOI
StatusUdgivet - feb. 2021

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