Social Media Attention,restructuring Inquiry And Corporate Mergers And Acquisitions

Mergers and acquisitions are an important way for companies to expand and allocate resources.However,due to the existence of agency problems,there are many actions that harm the interests of small and medium-sized investors in the name of mergers and acquisitions,but in fact,they are predatory.M&A transactions are becoming increasingly complex,and the Internet is gradually becoming an important channel for small and medium-sized investors to obtain information,which has completely changed the information ecology of the capital market.Investors use social media such as "stock bars" to adopt a "voting with their mouths" approach to make stock trading decisions,thereby influencing market trading behavior.China’s current regulatory concept of "information disclosure as the center" provides sufficient information for investment activities.Compared with the complex M&A reports,the inquiry letter for the reorganization is judged by the regulatory authorities based on their rich professional knowledge and industry experience,and reflects the professional opinions of the exchange on M&A transactions.This helps to alleviate the serious information asymmetry in the M&A process and is beneficial for investors’ decision-making.Based on the above analysis,this article takes the perspective of mergers and acquisitions and combines the rapid development of social media and the regulatory background of inquiry letters to explore the impact of social media attention on the market reaction to M&A announcements,and to discuss the mechanism of the role of inquiry letters in M&A decisionmaking and the impact of social media on M&A decisions.An empirical analysis of major asset restructuring transactions of A-share listed companies in China from 2014 to 2018 reveals that:(1)the more negative the social media discussion,the worse the market reaction to M&A announcements;(2)after the intervention of the inquiry letter,the impact of social media attention on the market reaction to M&A announcements is weakened,indicating that the exchange’s inquiry letter can alleviate the serious information asymmetry in M&A transactions and has governance effects,and also considers the influence of the text and tone features of the inquiry letter;(3)in terms of exploring the economic consequences of M&A,social media attention suppresses controlling shareholders from launching value-destructive M&A,that is,the more negative the social media discussion,the more likely the M&A transaction will be withdrawn,and it also exacerbates the risk of future stock price collapse for the completion party of the M&A.The results above show that social media forms collective wisdom by aggregating links from small and medium-sized investors,and has a certain impact on investors and companies’ M&A decisions.This article focuses on examining the impact of social media on market trading and M&A decision-making from the perspective of information demand,and verifies the regulatory role of inquiry letters.It expands the research on the governance role of social media and enriches the new scenario of research on the frontline regulatory effectiveness of exchanges.The research conclusions help investors understand the value of M&A and guide their investment decision.