Denial Wording Strength Of Takeover Rumors And The Effectiveness Of Clarification Announcement:the Moderating Function Of Source Honesty

Takeover rumors are important to financial market and can affect companies’stock price to some extend. This paper takes217the clarification announcements about takeover rumors of the A share stock market from1999to2010as samples and analysis their impact on stock price and the effectiveness of clarification announcements. The research of this paper mainly focuses in three aspects:First of all, takeover rumors could impact the share price and positive for abnormal return as good news for profits return. Most of the currently research had also proved this viewpoint. This paper verified whether takeover rumors have the same effect in Chinese financial market. The results of this research proved that nearly all stock price gained significant abnormal returns when takeover rumor happens as well as before or after these events. The similar conclusions had been dawned by classifying and researching the sample of takeover rumors. Second, after the takeover rumor happens, the company will release clarification announcement about the takeover rumor. There is both positive and negative confirmation about the clarification announcement. This paper takes the negative confirmation about clarification announcement as the samples to study clarification effects. According to the degree of their difference, it can be further divided into strong denial and weak denial. Research shows that although the clarification announcement can help with the recovery of share price. there is still exist one phenomenon which called "clarification announcements make nothing clear" and the effect of strong denial clarification is superior to the weaker one. Finally, this paper chooses source honesty of the enterprise as moderating variable to moderate the relationship between clarification wording and the effect of clarification announcement. The number of enterprise’s rule-breaking operations is used to represent the degree of source honesty. The higher of the number, the lower of the degree. The conclusion shows that the source honesty can moderate the relationship between the clarification wording and the effect of clarification announcement. The more persuasive of the source honesty, the better of the effect of clarification, the effect turns out best when the source honesty are most convincing and strongly denying and the worst when lack of persuasion and weakly denying.The conclusions of this paper can help A share stock market to deal with takeover rumors and guide the investors with their decision-making when facing takeover rumors.