Does the Market Value M&A Risk Factor Disclosures?

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Abstract

This paper investigates whether the market values M&A related risk factor and uncertainty disclosures and how the role of investment bank reputation affects such association. Using a sample of S&P 1500 firms in the period from 1994 to 2012, we show that though M&A related risk factor and uncertainty disclosures are positively related to the firms’ market value, the involvement of a reputable investment bank in the M&A transaction would negatively moderates such relation. Our results suggest how a reputable third-party may affect the market’s perception of a firm’s disclosed risk factors.

Authors

• Fujiao Xie, University of Hawaii-Manoa

• Tawei Wang, University of Hawaii-Manoa