American Univesity of Beirut

Mergers Under the Microscope: Analyzing Conference Call Transcripts


Jarrad Harford - Paul Pigott - PACCAR Professor of Finance and Chair of the Finance and Business Economics Department at the University of Washington’s Foster School of Business, University of Washington, Seattle.


Moderated by Dr. Mohamad Uddin, Assistant Professor of Finance at AUB OSB


About half of all merger deals between public US acquirers and targets involve a conference call within two days of the deal announcement, in order to communicate information to both acquirer and target shareholders to garner voting support and mitigate legal liability. Calls are associated with positive market reactions and a higher likelihood of deal completion. However, for public targets, only the latter result holds after correcting for endogeneity. Using a probabilistic topic modelling approach, we identify 20 highly interpretable topics as prevalent in the presentations and discussions recorded in the transcripts. The relative importance of several of these in a deal transcript is associated with target characteristics (e.g., whether the target is a private or a public firm), the method of payment, and acquirer characteristics (e.g., governance). The importance of several topics is associated with significant abnormal returns on deal announcement, and with deal completion likelihood.


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