To tell whether a news report about a merger is likely to prove true, pay close attention to the article’s author.
The most accurate kind of M&A reporter is “a reputable journalist who is older, who has a journalism degree, and who specializes in the industry of the target,” said Denis Sosyura, a professor at the University of Michigan’s Ross School of Business and an author of “Rumor Has It: Sensationalism in Financial Media.” Accuracy is also higher if the journalist is based in New York, the study found.
Sosyura and his co-author Kenneth Ahern examined over 2,000 articles that reported rumors of corporate mergers in more than 100 US news outlets between 2000 and 2011. If the article was followed by a public announcement of the merger within a year of the publication date, they deemed the article accurate. (Of course, sometimes a rumor can be true even if the deal ultimately falls apart.)
As part of the study, Sosyura and Ahern were also able to determine the most accurate American M&A reporters and news outlets. The Wall Street Journal’s Dennis Berman was the most prolific and most accurate reporter during the period studied. Here are the top 10 reporters and their accuracy rates:
- Dennis Berman, Wall Street Journal — 62.5%
- Robin Sidel, Wall Street Journal — 55.6%
- Nikhil Deogun, Wall Street Journal (now with CNBC) —53.8%
- Jeffrey McCracken, Bloomberg — 50.0%
- Anupreeta Das, Wall Street Journal — 42.9%
- Andrew Ross Sorkin, New York Times — 42.1%
- Suzanne Kapner, New York Times — 33.3%
- Sarah Ellison, Dow Jones News Service (now with Vanity Fair) — 33.3%
- Erica Copulsky, New York Post — 33.3%
- Robert Frank, Wall Street Journal (now with CNBC) — 23.1%
And here are the top 10 news outlets, by M&A rumor accuracy:
- Bloomberg (80%)
- Financial Times (62.5%)
- Dow Jones News Service (38.8%)
- Wall Street Journal (38.6%)
- New York Post (37.5%)
- New York Times (28.9%)
- Barron’s (26.7%)
- Boston Globe (25%)
- Reuters (19.2%)
- New York Times Blogs/Los Angeles Times (16.7%)
Sosyura and Ahern also found hints in the article itself can help indicate whether a merger rumor will turn out to be true. Consider a deal more likely to happen if the article mentions a takeover price, lists possible bidders, or indicates “negotiations are in an advanced stage.” It’s also a good sign if the article avoids words like “possible,” “appears,” and “conceivable.”
Rumors about newsworthy companies (“large firms with valuable brands and high valuations”) are significantly less likely to come true, according to the authors. The willingness of journalists to speculate about these brands makes stories less likely to be accurate, according to Sosyura.
“Everybody wants to write about Facebook because it’s on everybody’s minds,” he said. “But if they want to write about Cummins Engines in Indiana, they have to be pretty sure that the information is reliable. There’s not that much upside.”
Craig Silverman is a writer in Montreal.