Information transmission effect of forward-looking text: evidence from mergers and acquisitions report of Chinese listed firms

This paper examines the transmission effect of forward-looking text information in M&A announcement reports. We find that there is a significant positive relationship between forward-looking text information in M&A announcement reports and short-term cumulative abnormal returns (CAR). After a series of robustness tests, the conclusion remains unchanged. Further study finds that the positive relationship is more significant in firms with low-quality internal control and high levels of accrued earnings management. Overall, the result enriches the research literature on the economic consequences of text information disclosure. At the same time, it also provides an empirical basis for regulatory departments to improve the text information disclosure system of mergers and acquisitions.