A Study Of The Information Content Of The Tone Of The Text Of M&A Restructuring Reports

Scholars are very concerned about the information content of financial literature as a result of the advancement of computer technology.Studies in the literature have found that financial texts are rich in information content,which can play a complementary role to the disclosure of company surplus information,alleviate the information asymmetry between companies and external investors,and improve the quality of company information disclosure.The M&A and restructuring report differs significantly from traditional texts like annual reports in that it contains more information about the company’s future development prospects in addition to historical information about the parties to the M&A and restructuring transaction,in order to convince investors that the strategic decision to engage in M&A and restructuring is necessary and feasible.Can investors understand the message from the tone of the M&A report text?However,studies have shown that management may deceive investors by strategically timing M&A announcements to grab attention from investors and spur a positive market reaction,or by issuing overly optimistic future earnings forecasts and holding back bad news about future earnings at the time of the M&A to boost its market value.Then,does the literary tone of M&A restructuring reports serve as a dependable source of information and serve as a tactical management tool for management?Based on the aforementioned factors,this study uses Shanghai and Shenzhen A-share listed businesses that had significant asset restructuring from 2008 to 2019 as its research samples to investigate the information content and information quality of the text tone of M&A and restructuring reports.The first is to check whether investors can receive the information from the text tone of M&A restructuring reports.The net positive tone of the M&A report text is primarily absorbed through investors’ attention and understanding,which is then reflected in the stock price,according to the mechanism test and the empirical study,which also finds a significant positive correlation between the net positive tone of the M&A report text and the short-term cumulative excess market return.Particularly,the positive link between the net positive tone of the language and the short-term cumulative excess market return is more substantial the less complex the text is.This generates an increase in investors’ extraordinary search.The heterogeneity analysis finds that the textual tone information of M&A reports is more useful for investors’ decision making in listed companies with higher legal compliance index and poorer information and communication.The reliability of the information in the M&A report’s language is the subject of our second analysis.We specifically investigate whether the M&A report’s textual tone can accurately forecast the effects of M&A integration at a later stage.The empirical study reveals that the amount of goodwill impairment following the M&A increases with the net favorable tone of the M&A report.This link is especially important in M&A restructuring with performance commitments and share-based reward,which shows that the "positive" tone of the M&A report is unreliable and is instead just a "false" picture that the management is purposefully painting.Prosperity".Based on the study of the information content and information quality of text tone in M&A and restructuring reports,this paper reminds investors that they need to be alert to text traps,while regulators should improve and standardize the disclosure rules of text information in M&A and restructuring reports in the process of strict supervision of companies’ M&A activities,emphasize the truthfulness and objectivity of text information disclosure,constrain the description methods in M&A and restructuring reports,and strengthen information disclosure "ex ante supervision" so as to optimize the market environment for M&A and restructuring of companies.