Do Acquirers in Stock Swap Acquisitions Disclose Good News or Withhold Bad News?

Companies that use their own stock to finance acquisitions have incentives to increase their market values prior to the acquisition date. This study examines whether such companies strategically disclose good news or withhold bad news in order to boost their high stock prices. I find that stock swap acquirers are not more likely to issue favorable management forecasts during the period before the acquisition compared to the period after. On the other hand, I find strong evidence that stock swap acquirers are less likely to issue unfavorable management forecasts. The results suggest that forecasting good earnings news is perceived to be more costly than is remaining silent when the company has bad news. I also examine revisions to analysts’ earnings forecasts in order to capture any disclosures that companies make other than through management forecasts of earnings. I find that analysts’ forecasts of stock swap acquirers are not revised up but they are revised down less during the period before the acquisition. Consistent with the evidence from management forecasts, these findings suggest that stock swap acquirers do not disclose good news but they do withhold bad news in order to maintain higher stock prices.