N°23-52: Are Acquirer Shareholders Happier when Their Industries Are Unhappy?

Many mergers destroy shareholder value because managers intentionally waste corporate resources to pursue private benefits. Using textual analysis, we link industry conditions as reflected in acquirer peers' 10-K statements to acquirer announcement abnormal returns. We find that more negative industry conditions are associated with higher acquirer abnormal returns. Our results suggest that difficult times impose discipline on managers who then tend to focus on deals that create value for acquirer shareholders.