TY - JOUR
T1 - Opening M&A Strategy to Investors
T2 - Predictors and Outcomes of Transparency during Organisational Transition
AU - Yakis-Douglas, Basak
AU - Angwin, Duncan
AU - Ahn, Kwangwon
AU - Meadows, Maureen
PY - 2017/6/1
Y1 - 2017/6/1
N2 - Our study theorises and tests why organisations engage in more external transparency as an open strategy practice and the share-price related outcomes associated with these practices. Drawing from literature on information asymmetry, we suggest that organisations that depart from their existing strategy or deviate from industry norms are more likely to open up their strategy in order to escape negative evaluations by analysts and scrutiny by investors. We further investigate how the stock market responds to more openness in strategy. In a dataset comprising of a sample of 472 M&A deals and 886 associated corporate voluntary communications over a five-year period, we find that the likelihood of organisations engaging in open strategy practices that contribute to external transparency is associated with the degree to which an organisation’s strategy differs from industry norms, but is not associated with how much it varies from its existing one. Regarding organisational outcomes of increased openness in strategy, we illustrate that increasing the transparency of M&A strategy to investors through voluntary communications can bring share-price related benefits. Our research contributes to literature on open strategy, information asymmetry, and managing M&A.
AB - Our study theorises and tests why organisations engage in more external transparency as an open strategy practice and the share-price related outcomes associated with these practices. Drawing from literature on information asymmetry, we suggest that organisations that depart from their existing strategy or deviate from industry norms are more likely to open up their strategy in order to escape negative evaluations by analysts and scrutiny by investors. We further investigate how the stock market responds to more openness in strategy. In a dataset comprising of a sample of 472 M&A deals and 886 associated corporate voluntary communications over a five-year period, we find that the likelihood of organisations engaging in open strategy practices that contribute to external transparency is associated with the degree to which an organisation’s strategy differs from industry norms, but is not associated with how much it varies from its existing one. Regarding organisational outcomes of increased openness in strategy, we illustrate that increasing the transparency of M&A strategy to investors through voluntary communications can bring share-price related benefits. Our research contributes to literature on open strategy, information asymmetry, and managing M&A.
U2 - 10.1016/j.lrp.2016.06.007
DO - 10.1016/j.lrp.2016.06.007
M3 - Article
SN - 0024-6301
VL - 50
SP - 411
EP - 422
JO - LONG RANGE PLANNING
JF - LONG RANGE PLANNING
IS - 3
ER -