Abstract

This paper examines 680 initial U.S. takeover rumours which name both bidder and target firms from 2002 to 2011. We find that rumours attributed to an insider and those indicating a positive synergy would result from a takeover are significant predictors of future takeover announcements between these rumoured firms. Interestingly, these same rumour types are also significantly related to pre-rumour bidder firm returns. In addition, bidding firm rumour date returns are significantly higher for smaller firms, in line with the literature for bidding firm announcement date effects. Finally, for the subsample of rumoured firms which do engage in the rumored takeover, we find that the longer the interval between the rumour date and announcement date, the more positive the announcement date return. In sum, we interpret results as evidence confirming hypotheses that the anticipation of takeovers should be accounted for in the analysis of announcement date effects.