The Communication Advantage: Investigating Impacts of Interim News Events

For investors the M&A process is characterised by evaluative uncertainty – where there is an absence of clear indicators of how protagonist firms may perform. This may have negative consequences for those firms’ abilities to enact intended strategies. It is widely reported that the financial media provides information that affects share prices, but there are few studies that examine how firms actively manage their communications in order to achieve their strategic ends. This study focuses on how organizations manage investment analysts’ evaluative uncertainty during M&A through a specific form of impression management, namely, interim news events. We focus on investment analysts as legitimate third-party evaluators of organizations, and providers of certification as to a firm’s ability (or lack of ability) to pursue strategic decisions such as M&A. In a dataset comprising of a sample of 36,376 deals and 163,023 associated interim news events over a ten year period, we suggest that voluntary disclosures are key in managing analysts’ evaluative uncertainty during M&A. Our research contributes to literature on M&A, voluntary disclosures, evaluative uncertainty and impression management