Do financial analysts play a role in shaping the rival response of target firms? International evidence

Donghui Li, Zhian Chen, Zhe An, Michael Murong

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)


Employing a sample of 4271 initial-industry acquisitions across 34 countries from 1989 to 2013, we show that the rival firms which are in the same industry as the target firms exhibit positive cumulative abnormal returns (CARs). In addition, those rivals with higher analyst coverage are associated with higher CARs. The results are robust to the natural experiment based on the exogenous decrease in analyst coverage (i.e., brokerage closure and merger). Careful comparisons of the results show dramatic differences between the United States (U.S.) and non-U.S. subsamples. We further show that a more transparent macro information environment can substitute for the role of financial analysts in determining the rival response. Overall, our findings support the Acquisition Probability Hypothesis.
Original languageEnglish
Pages (from-to)841-860
Number of pages20
JournalJournal of Corporate Finance
Publication statusPublished - Aug 2017


  • M&A
  • Rival response
  • Analyst coverage
  • Information environment

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