Mergers and Attributions: An Examination of M&A Terminations in 1996–2022

Abstract Firms often make attributions regarding their actions in managing relationships with shareholders and investors. While research utilizing attribution theory has found that firms tend to attribute negative outcomes to external factors and positive outcomes to internal ones, this behaviour can have both positive and negative consequences. Addressing these contrasting results, our paper adopts a multidimensional framework of attribution to study how firms offer explanations for their actions. Leveraging insights from attribution theory and expectancy violation theory, we investigate whether investors respond diversely to firms' heterogeneous attributions for terminating acquisitions. Our findings indicate that an initial positive market reaction to an acquisition announcement is negatively correlated with the market reaction to the acquisition's termination. This negative relationship diminishes when the acquirer attributes the termination to external, uncontrollable and unstable factors. This paper contributes to the acquisition literature by highlighting multiple categories of attributions for firms to strategically manage market reactions.