The Impact of Investors’ Surprise Emotion on Post-M&A Performance: A Social Media Analytics Approach

Previous studies showed that investors drew on management perception of the synergetic potential to make better investment decisions. In the context of mergers and acquisitions (M&A), our research reveals that investors also gain insights from the “wisdom of crowds” on social media. We investigate whether investors’ surprise emotion, as mined from their social postings on Twitter, exerts a significant effect on their subsequent decision-making following M&A announcements. Empirical results demonstrate that investors’ surprise emotion has a significantly negative effect on firms’ post-M&A stock returns. Such a finding facilitates investors’ subsequent investment decision-making based on peers’ early emotional responses on social media. Furthermore, we find evidence that investors also rely on additional information to estimate the reliability of such “wisdom of crowds” through two positive moderators such as investors’ social media involvement and the relative size of M&A deal. The proposed methodology helps managers evaluate the synergetic potentials of M&A deals beforehand.