Department of Management

Similarity perceptions in investor reactions to acquisition announcements

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

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

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.

Original languageEnglish
Article number101946
JournalLong Range Planning
Volume54
Issue1
ISSN0024-6301
DOIs
Publication statusPublished - Feb 2021

    Research areas

  • Investor reactions, Mergers and acquisitions, Relatedness, Similarity, Taxonomic similarity, Thematic similarity

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