Document Type

Conference Paper

Publication Date

2025

Publication Title

European Financial Management Association 2025 Annual Meetings

Pages

1-53

Conference Name

European Financial Management Association 2025 Annual Meetings, June 25-28, 2025, Athens, Greece

Abstract

We examine whether and how acquiring firms' complexity affects investor perception at the announcement of M&A decisions. Using well-established data of firm complexity developed through combining machine learning and a lexicon of words, we find a significant positive relationship between acquiring firm complexity and cumulative abnormal returns (CAR), indicating that more intricate firms are viewed as more valuable or competent in mergers and acquisitions. This association is stronger for acquirers with high operating risk, organizational capital, R&D intensity, large and independent boards, and larger targets. We also present evidence that high-complexity bidders offer higher takeover premiums. Our study contributes to the existing literature by showing that the complexity of acquirers positively impacts the market's reaction to merger and acquisition announcements. Overall, our findings suggest that firm complexity influences various facets of corporate finance, including capital structure, risk management, and investment decisions, which merit further investigation.

Rights

© 2025 John A. Doukas. All rights reserved.

Included with the kind written permission of the copyright holder.

Original Publication Citation

Chowdhury, R., & Doukas, J. A. (2025). Does the acquirer's complexity affect the market reaction to M&A decisions? [Conference paper]. European Financial Management Association 2025 Annual Meetings, Athens, Greece. https://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2025-Greece/papers/Full_Paper_with_Authors_Detail.pdf

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