The lone wolf versus the herd The influence of individualism on the decision-making process of investors in the biotechnological sector – a cognitive perspective on signaling theory.
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2025-06-30
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en
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How does the level of individualism influence the cognitive process behind investor decision-making? This research attempts to answer this question by examining how investors interpret acquisition announcements through the lens of signaling theory with a focus on the cognitive aspects behind individualism. Literature gaps including the cognitive complexity of signaling theory and the influence of cultural dimensions on market reactions are addressed. Moreover, prior research on acquisition motives is extended by exploring how individualism shapes market responses to different acquisition motives. The focus is set on the biotechnology sector for its high M&A activity and its strong presence in both Europe (high-individualism) and Japan (low-individualism). An event study and OLS regression of 378 acquisition announcements was conducted. While all hypotheses were rejected, several interesting trends emerged. High-individualistic investors respond more positively to acquisition announcements, especially for explorative motives. Conversely, low-individualistic investors respond more cautiously. An unexpected finding revealed that increased acquisition experience is associated with increased cumulative abnormal returns in low-individualistic countries, while in high-individualistic countries, cumulative abnormal returns tend to decrease as acquisition experience increases. The findings advance signaling theory by highlighting how cognitive filters and cultural differences influence investor reactions to acquisition announcements.
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Faculteit der Managementwetenschappen