Merger And Acquisition Rumors,the Rumors' Clarification Announcements And The Capital Market's Reaction

Rumors are of great value for the investors in the capital market as an important source of information.Among all the rumors and hearsays in Chinese equity exchange market,rumors about listed companies' merger and acquisition count for more than 10 percent,which are usually used most by the investors,as well as the most common factor that cause the volatility of the capital market.For instance,rumors that X Company would merge another company appeared in the Sina Financial News and some other popular stock BBS.On this very day,the closing price of X Company rose as highly as 10.03%,and the turnover rate of this company's stock were more 17%continuously in the following four trading days.As we can see,rumors about merger and acquisition will influence the investors'judgments and the trade of related company's stock greatly.According to the regulations and rules formulated by the China Securities Regulatory Commission,as well as the Shanghai&Shenzhen Stock Exchange,the listed companies must release announcement to clarify the status and the possible results of the events or affairs which have influence or will influence the specific company's stock trade.However,the clarification announcement usually couldn't exert as expected due to our incomplete information disclosure system and the lack of investors' confidence about the announcement.What's worse,depending on their dominant position in the information asymmetry,some listed companies make use of the rumors and their announcement about merger&acquisition to manipulate the stock price or to finance,which harm the benefits of investors greatly.To investigate the influence of rumors about merger&acquisition and whether the clarification announcement regulate system has been of full capacity,the essay research the following three questions.I studied the market reaction to the rumors about merger&acquisition firstly by classifying the announcement into positive rumors and negative rumors according to the context.Then,I researched whether the clarification announcements exert their expected function.To do this,I divided the clarification announcements into strong ones and weak ones to verify the clarification announcements,especially the strong ones have restrained the fluctuation of the stock prices.Lastly,I was interested in whether the lag time of the clarification announcement after the rumors had a great influence on their clarification effect.So,I added a moderating variable about the lag time to investigate the above question.I collected all the clarification announcements in China A-share equity market ranging from 2009 to 2015 from the Wind Economic Database,then I selected announcements about merger&acquisition.Based on the announcement,I traced back to the rumors about M&A and classified the rumors into positive and negative ones according to some specific principles.Using event study and regression analysis,I researched the reaction of listed companies' stock exchange to different kinds of rumors and announcements.The empirical results shows that the capital market reacted to the rumors about merger&acquisition effectively and the positive rumors caused the company's stock prices had significant,positive abnormal returns in specific time window(on the day that the rumors appeared and three days before).And the negative rumors caused the company's stock prices had significant,negative abnormal returns in specific same time window.Totally,the abnormal returns of positive rumors are significantly greater than that of negative ones.Different clarification announcements have different influence on different rumors.For the positive rumors,clarification announcement could exert well on the day that the rumors appeared and the following one day.For the negative rumors,clarification announcement could exert as expected.Furthermore,I did a further study about the positive rumors,finding that the strong clarification announcement and the cumulative abnormal returns have significant negative correlation,that is,the strong clarification could clarify the rumors significantly.The lag time of the clarification announcement after the appearance of rumors has a significantly positive correlation with the abnormal returns.The longer the clarification announcements lag,the less the clarification effect has.And,the too long lag time could make the strong clarification announcement has little effect.