Narrative Disclosure Strategies Around Stock‐for‐Stock M&As

Using 1,470 cash and stock‐for‐stock mergers and acquisitions from 2004–2020, we document that stock‐for‐stock bidders strategically manage the narrative content of earnings press releases in the year preceding the announcement to lower acquisition costs. Beyond inflating tone, we find that they also reshape tone dispersion, with positive language distributed more broadly across earnings press releases and negative language increasingly concentrated. Abnormal tone inflation leads to substantial short‐run gains ($22 million for the average bidder), with smaller but reinforcing effects from dispersion. These patterns are most pronounced in larger deals and weaker‐monitoring environments but reverse in the long run, as markets discount narrative manipulation.