The Effect of News Coverage on the Market Reactions of Merger and Acquisition Events

Mergers and acquisitions are events that may cause abnormal returns to the acquirers. In this study, we study the impact of news coverage on the M&A events and the potential spillover effect of co-occurring firms in news before event announcement. Based on the news coverage computed from the Wall Street Journal from 1990 to 2008, we studied the effect of news coverage on M&As using the event study methodology. Our study finds 1.130% of no-media premiums in the [-1, +1] period using news coverage of the [-20, -3] period. (“Day 0” denotes the announcement date.) There are also no-media premiums in longer periods before and after the announcement. The no-media premiums differ in the groups of firms of different characteristics. The release time of news also affects the returns of M&As. However, we do not find abnormal returns of the co-occurring firms.