Acquisitions and the Visual Representation of Strategy

Abstract

Many organizations use some form of visual frameworks for the purpose of sense-making. These frameworks are used to communicate their actions and intentions to stakeholders. We examine the effect of such frameworks in the context of acquisitions. Particularly, we theorize that the stock market’s reaction to acquisition announcements is moderated by the use of visualizations. We argue that visualizations help create clarity for investors, resulting in more positive reactions in the stock market, albeit with greater variance – because clarity can also backfire. Furthermore, we argue that the positive effect of these visualizations will be more pronounced in case the acquisitions represent a new course of action for the firm. We test our predictions through a matched sample design of 461 acquisitions by publicly listed US firms. We discuss implications for literatures on sense-making, impression management, and on the use of visual artefacts in management.