What causes investors’ misevaluation of M&A performance? Survey evidence from Japan

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PurposeMotivated by literature suggesting that investors often misevaluate the effects of mergers and acquisitions (M&A), this study examines the relationship between investors' usage of information types/channels and their tendency to misevaluate M&A performance.Design/methodology/approachA survey methodology was employed to gather data from 1,000 individual investors in Japan. The survey focused on investors' evaluations of selected M&A transactions on announcement and response dates, grouping respondents into over-valuers, under-valuers and others based on changes in their evaluations.FindingsFirst, over-valuers are more likely to rely on earnings forecasts and synergy estimates, while under-valuers prioritize methods of payment and cultural or geographic distance. Second, those relationships between over- and under-valuation and information type usage are strengthened or weakened by different usage of information channels. Third, over-valuers regard information from securities firms as crucial when subsequently correcting their evaluations.Originality/valueThis study contributes to the literature on post-M&A underperformance by focusing on individual investor behaviors rather than aggregate stock market reactions. It also provides insights into how different types of information and channels influence investor evaluations, which has implications for M&A disclosure practices and standard setting.