Do M&A Delistings Impact U.S. Capital Markets? Evidence of Negative Information Externalities for Industry Peer Firms

This study documents that M&A delistings are associated with a deterioration in the quality of analysts’ informational environment for industry peer firms, measured by an increase in analysts’ absolute forecast errors and dispersion. This effect persists for up to six quarters and is larger when the delisting target firm contributes relatively more to the industry information environment. Further, consistent with the loss of target firms’ disclosures contributing to these negative information externalities, we find that, among analysts forecasting earnings for an industry peer firm, those who also followed the delisted target firm in the pre-M&A period experience a larger increase in their absolute forecast errors than those who did not. Additional analyses – including a comparison of M&As involving public versus private target firms and changes in analysts’ public and private information for industry peer firms – also provide evidence consistent with the loss of target firms’ public disclosures contributing to the deterioration in the quality of analysts’ information environment for industry peer firms.