The Use of Strategic Noise in Reactive Impression Management: How Do Market Reactions Matter?

Abstract

Management scholars have argued and demonstrated that firms use strategic noise as an anticipatory form of impression management to minimize the effect of a potential negative reaction to an event of interest. In this study, we contribute to the impression management literature by exploring how both positive and negative strategic noise may intercede in the process of reactive impression management. We argue that in reactive impression management, since firms already know the initial market reaction to a focal event, they can “strategically” release subsequent positive or negative strategic noise depending upon the direction and magnitude of the initial market reaction to the focal event. Using a sample of 7,575 mergers and acquisitions from 2001 to 2015 that represent our focal events, we find strong evidence to support our arguments.