Acquiring firms’ transparency and their returns around M&A announcements: Evidence from China

This study empirically examines the effects of the information transparency of acquiring firms on their stock returns around merger and acquisition (M&A) announcements in China. We find that acquiring firms’ information transparency is positively associated with their returns within M&A announcement windows. Our cross-sectional analyses show that such associations are more significant for acquiring firms from regions with an underdeveloped market institution, with lower institutional investor shareholdings, and that are state-owned, suggesting that acquiring firms’ information transparency is a critical determinant of perceived M&A benefits in environments with severe agency problems. We expect our results to be relevant to other emerging markets with institutional characteristics similar to those of China, such as significant agency problems and weak investor protection.