The informational consequences of good and bad mergers

We study the information production dynamics in financial markets response to Mergers and Acquisitions (M&As) announcements. find that acquirers with low levels of pre-announcement stock price informativeness experience a substantial increase their corresponding post-announcement positive Cumulative Abnormal Returns (CAR). show this is due enhanced prospect deal completion. By contrast, high acquirer limit traders' incentives search for, acquire, new information. also similar apply changes acquirers' analyst coverage. Emphasizing important role acquisition costs influencing informed trading, CAR increases acquiring firm's M&As involving public rather than private subsidiary targets. Overall, we have informational consequences beyond immediate effects on prices.