Cameron School of Business at UNCW

Corporate media connections and merger outcomes

Posted by Cameron School of Business on Sep 30, 2020 1:09:47 PM

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Story notes contributed by Dr. Miran Hossain, Assistant Professor of Finance at the UNCW Cameron School of Business.

Miran Hossain, Ph.D. assistant professor of finance at UNCW Cameron School of Business, along with  his co-author Dr. David Javakhadze from Florida Atlantic University, recently published a paper titled “Corporate media connections and merger outcomes” in the Journal of Corporate Finance. The journal is rated “A*” by the Australian Business Deans Council (ABDC) journal list.

While a large number of studies document that media disseminates important information, facilitates investor attention and ensures monitoring of corporations, there is also equivalent concern that business media lacks in-depth research, tends toward sensationalism and may even produce biased coverage in certain circumstances. They examine the debated role of media in light of the recent studies associated to social ties of corporate executives. Contemporary studies in economics and finance conclude, in general, that social network at one end, may facilitate reduction of information asymmetry or on the other end, may aggravate agency problem. The authors argue that conduits of social capital flowing through the ties between corporate executives and media firms may provide an explanation for the media’s contested role. They particularly investigate the implications of acquirer social ties with media for merger outcomes.

Results from the study show that acquirers’ media connections are associated with greater merger announcements returns, lower takeover premiums, increased likelihood of deal completion. Media connections make the acquirers more acquisitive, and result in post-merger long term underperformance. The authors also examine whether acquirers’ media connections affect media coverage and sentiment prior to the merger announcement. If acquirers exploit their connections with the media companies to manipulate information flow in merger transactions, media connection is expected to be positively associated with news coverage as well as the tone of the articles prior to merger announcement. Their analysis show that the media connections are positively related with acquirers’ media coverage and sentiment of the news articles during the pre-bid announcement period.

Read the journal article here: https://authors.elsevier.com/c/1bnsG3JGUMpQRg

Topics: research, mergers and acquisitions, media connections, media coverage and sentiment

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Cameron School of Business at UNCW

UNCW was established as Wilmington College in 1947. The Department of Business and Economics became the Cameron School of Business in 1979. Focused on the transformation of today’s business world from the industrial age into the information age, business education at the Cameron School of Business is focused on the technical, analytical and interpersonal skills students will need to lead this fundamental change in the business world through the 21st century.

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