Left At The Altar: How Do Firms Explain M&A Terminations?

Time: December 5, 2019 (Thursday), 12:30-14:00

Location: Zhifuxuan Conference Room, National School of Development, Peking U.

Speaker: Zhe (Adele) Xing, Assistant Professor of Management at Leavey School of Business, Santa Clara University

Abstract:

Firms make attributions about their actions when managing their relationships with shareholders and investors. Research applying attribution theory has found that firms tend to blame others for bad performance but take credit for good performance and this tendency could lead to both positive and negative consequences. To address these competing findings, this paper uses a multi-dimensional framework of attribution to study how firms offer explanations about their actions. This paper draws insights from attribution theory to examine whether investors react differently to firms’ heterogeneous attributions about acquisition terminations. Results suggest that when the initial market assessment to the announcement of an acquisition is negative, the market will react positively when the deal is terminated and it will react even more positively when the acquirer attributes deal termination to internal (i.e. the acquirer itself) and controllable factors. However, when the initial market assessment to the announcement of an acquisition is more positive, the market will react more negatively when the deal is terminated and this effect is not influenced by the acquirers’ attributions. This paper thus contributes to the literature on M&A by suggesting that firms could use various types of attributions to strategically manage audience reactions.

Bio

Zhe (Adele) Xing is an Assistant Professor of Management at Leavey School of Business, Santa Clara University. She received an M.A. in Strategic Management in Peking University, and a Ph.D. in Strategy from the University of Southern California. Her research interests include Strategic Management, Behavioral Strategy, Cooperative Strategy, Mergers and Acquisitions, Contracting, and Alliances.