Abstract:

This paper attempts to quantify the short-term impact of takeover rumors on target stock prices. The study was conducted on the French stock market between 1997 and 2011 and concerns 200 rumors appeared in the media (news agencies, newspapers and web sites). Our results show that this particular kind of information has a significant impact on the prices of target companies around and after the appearance date. The best performance of target share is observed 50 days after the broadcasting of the rumors in the media, with an average return of 4 %. This performance is mainly explained by three components: the credibility, the characteristics of rumors and the anticipated effects of takeover bid.