Deal or No Deal

Abstract: Purpose: The purpose of the thesis is to investigate if deal completion probability is associated with the stock market’s initial reaction to the M&A announcement. Furthermore, the study aims to explore if other characteristics have a relationship with deal completion, and if they have a moderating effect on the relationship with deal completion and the stock market’s reaction. Methodology: We use a probit model to estimate how the dependent variables affect the probability of deal completion. We also conduct a series of robustness tests and univariate analysis to substantiate our results. Theoretical perspectives: To make sense of our results, we use the theories of shareholder value perspective, efficient market hypothesis, manager learning, hubris and information asymmetry. Empirical foundation: Using the SDC’s Refinitiv EIKON database, we collect a sample of 589 Nordic M&A deals between 2010 and 2023. Conclusions: We find no evidence that the stock market’s initial reaction to the M&A announcement, targets on unregulated stock exchanges, or the experience of M&A advisors affect M&A deal completion probability. However, serial acquirers have a significant negative relationship with deal completion. Additionally, we find no evidence that any of these characteristics have any moderating effect on the relationship between deal completion and the stock market’s reaction. These results are robust using 9 different robustness tests.