Opening M&A strategy to investors: Predictors and outcomes of transparency during organisational transition

Basak Yakis-Douglas, Duncan Angwin, Kwangwon Ahn, Maureen Meadows

Research output: Contribution to journalArticle

10 Citations (Scopus)
65 Downloads (Pure)

Abstract

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.
Original languageEnglish
Pages (from-to)411-422
Number of pages12
JournalLong Range Planning
Volume50
Issue number3
Early online date7 Jul 2016
DOIs
Publication statusPublished - Jun 2017

Keywords

  • Open strategy
  • M&A
  • information asymmetry
  • strategic variation and deviation
  • voluntary M&A announcements

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