Conference calls around merger and acquisition announcements: Do they reduce information asymmetry? UK Evidence

• Study voluntary information disclosure in the form of conference calls by UK firms.
• Conference calls facilitate the smoother transmission of M&A-related information.
• Conference calls reduce informed trading through option markets before M&A events.
• Firms without equity options should be more willing to hold conference calls.

This paper examines conference call meetings held around merger and acquisition (M&A) announcements in the UK market. Our main findings indicate that conference calls not only facilitate the smoother transmission of M&A-related information in the stock market and smooth the rate of the information flow to the market, but also they reduce informed trading through option markets before M&A events. We also find that there is an inverse relation of analysts’ forecast error and conference call probability, that firms initiate conference calls during M&As when their transactions are large and are facing liquidity constraints, and that the probability of a firm holding a conference call around an M&A is strongly and inversely related to the existence of traded equity options on its stock.