Stock market response to research and development expenditures of the firm in the context of mergers and acquisitions
1University of Oulu, Faculty of Economics and Business Administration, Department of Accounting
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Oulu : University of Oulu,
|Academic dissertation to be presented with the assent of the Faculty of Economics and Business Administration of the University of Oulu for public defence in Arina-sali (Auditorium TA105), Linnanmaa, on 14 January 2011, at 12 noon
Professor Juha-Pekka Kallunki
Professor Juha Kinnunen
Professor Joshua Livnat
This dissertation investigates the success of technology M&As. The research question is approached through four separate empirical essays, each of which assesses a different but interrelated issue of value creation of technology M&As. The approach used throughout the dissertation is to consider the motives of improving acquirer’s R&D activity through the acquisition of a technology firm and stress the role of the interaction between acquirer’s and target’s resources. The first two essays investigate the valuation consequences of M&As, while the following two essays examine pricing implications of M&As.
The results indicate that technology M&As are successful in enhancing the acquiring firm’s R&D activities to the extent that it manifests as an increase in the stock market valuation of acquirer’s R&D spending and its higher future profitability. The results also demonstrate that investors do not fully recognize these benefits at the announcement of M&A. Therefore investors benefit from technology M&As in the long run when these benefits begin to materialize. Furthermore, the results show that even when compared to other possible motives, enhancing acquirer’s R&D activities is an important and successful motive for M&As, emphasizing the absorptive capacity of the acquiring firm in generating synergies from the combination of two firms.
Overall, the findings of the dissertation provide more evidence on the success of mergers and acquisitions motivated by technology improvement. The thesis emphasizes the interaction between acquirer’s and target’s resources in creating synergies from M&As, with a focus on technological resources. The evidence also has important implications for the literature on the stock market valuation of R&D expenditures as it indicates that technology M&As can be considered an R&D investment with significant impacts on this activity.
Acta Universitatis Ouluensis. G, Oeconomica
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