TY - JOUR

T1 - Opening M&A strategy to investors

T2 - predictors and outcomes of transparency during organizational transition

AU - Yakis-Douglas, Basak

AU - Angwin, Duncan Neil

AU - Ahn, Kwangwon

AU - Meadows, Maureen

N1 - This is the author’s version of a work that was accepted for publication in Long Range Planning. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Long Range Planning, 50, (3) 2017 DOI: 10.1016/j.lrp.2016.06.007

PY - 2017/6

Y1 - 2017/6

N2 - Our study theorizes and tests why organizations engage in more external transparency as an open strategy practice and the share-price related outcomes associated with these practices. Drawing from literature on information asymmetry, we suggest that organizations that depart from their existing strategy or deviate from industry norms are more likely to open up their strategy in order to escape negative evaluations by analysts and scrutiny by investors. We further investigate how the stock market responds to more openness in strategy. In a dataset comprising of a sample of 472 M&A deals and 886 associated corporate voluntary communications over a five-year period, we find that the likelihood of organizations engaging in open strategy practices that contribute to external transparency is associated with the degree to which an organization’s strategy differs from industry norms, but is not associated with how much it varies from its existing one. Regarding organizational outcomes of increased openness in strategy, we illustrate that increasing the transparency of M&A strategy to investors through voluntary communications can bring share-price related benefits. Our research contributes to literature on open strategy, information asymmetry, and managing M&A.

AB - Our study theorizes and tests why organizations engage in more external transparency as an open strategy practice and the share-price related outcomes associated with these practices. Drawing from literature on information asymmetry, we suggest that organizations that depart from their existing strategy or deviate from industry norms are more likely to open up their strategy in order to escape negative evaluations by analysts and scrutiny by investors. We further investigate how the stock market responds to more openness in strategy. In a dataset comprising of a sample of 472 M&A deals and 886 associated corporate voluntary communications over a five-year period, we find that the likelihood of organizations engaging in open strategy practices that contribute to external transparency is associated with the degree to which an organization’s strategy differs from industry norms, but is not associated with how much it varies from its existing one. Regarding organizational outcomes of increased openness in strategy, we illustrate that increasing the transparency of M&A strategy to investors through voluntary communications can bring share-price related benefits. Our research contributes to literature on open strategy, information asymmetry, and managing M&A.

KW - Open strategy

KW - M&A

KW - information asymmetry

KW - strategic variation and deviation

KW - voluntary M&A announcements

U2 - 10.1016/j.lrp.2016.06.007

DO - 10.1016/j.lrp.2016.06.007

M3 - Journal article

VL - 50

SP - 411

EP - 422

JO - Long Range Planning

JF - Long Range Planning

SN - 0024-6301

IS - 3

ER -