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Study by Shantanu Dutta Delves into the Media’s Influence on Deal Outcomes

While the media are considered to play an influential role in business, very little research has been done on the relationship between firm-specific media coverage and corporate decision making. The Telfer School’s Shantanu Dutta is helping to change that with a new study on how business reporting shapes firms’ merger and acquisition decisions.

“Our preliminary evidence suggests that the media do influence deal outcomes, independently of the market’s response to a given M&A play,” notes Dutta, an associate professor of finance at the Telfer School. “In particular, the press has something of a ‘corporate governance’ role, one that has not been explored much empirically.”

Dutta and his team seek to understand better how reporting in reputable newspapers might affect the probability of making a deal – and the degree to which negative coverage has a restraining effect. But they are also looking into the impact of coverage on other strategic decisions in M&A, “such as the acquiring firm’s payment method, and the impact on future acquisitions.”

The 2008-2009 global financial crisis sparked interest among finance researchers in the role of the press. After the financial crisis, traditional measures of firm performance no longer appeared adequate. In response, some finance researchers began to examine how verbal information contained in media reports provides information over and above the traditional performance measures.

The findings from the study will encourage a better understanding about the linkages between media coverage and M&A decision making processes among investors and managers, says Dutta.

“We recognize that business reporting is not the only factor that influences major corporate decisions, but it certainly has the potential to play a significant role in shaping managers' and investors' perceptions.”