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Corporate innovation, likelihood to be acquired, and takeover premiums

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  • (Jennifer) Wu, Szu-Yin
  • Chung, Kee H.

Abstract

We analyze the effect of a firm's innovation activities on its likelihood to be acquired and the takeover premium using a large sample of M&A transactions. We show that firms with larger innovation outputs and R&D investments are more likely to be acquired, receive unsolicited bids, and receive multiple bids. The takeover premium increases with the target firm's innovation output, and this positive relation is stronger when there are more competing bidders, when acquiring firms’ product markets are competitive, and when technological proximity is lower in the acquiring firms’ industry. Both the acquirer's cumulative abnormal return around the announcement date and post-acquisition operating performance are positively related to the target firm's innovation output and R&D spending.

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  • (Jennifer) Wu, Szu-Yin & Chung, Kee H., 2019. "Corporate innovation, likelihood to be acquired, and takeover premiums," Journal of Banking & Finance, Elsevier, vol. 108(C).
    • Handle: RePEc:eee:jbfina:v:108:y:2019:i:c:s0378426619302092
    DOI: 10.1016/j.jbankfin.2019.105634
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    8. Martinez Cillero, Maria & Gregori, Wildmer Daniel & Bose, Udichibarna, 2023. "Does Green Transition promote Green Innovation and Technological Acquisitions?," JRC Working Papers in Economics and Finance 2023-04, Joint Research Centre, European Commission.
    9. Ruichen Ma, 2023. "The sustainable development trend in environmental, social, and governance issues and stakeholder engagement: Evidence from mergers and acquisitions in China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3159-3173, November.
    10. Carlo Altomonte & Nevine El-Mallakh & Tommaso Sonno, 2024. "Business groups, strategic acquisitions and innovation," CEP Discussion Papers dp1996, Centre for Economic Performance, LSE.
    11. Hicham Meghouar, 2024. "Takeover in Europe: Target characteristics and acquisition likelihood," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(7), pages 2588-2606, November.
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    More about this item

    Keywords

    Innovation; Patents; Patent citations; Acquisitions; Takeover premium;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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