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Business Strategy and M&A Transactions

Author

Listed:
  • Shiang Liu

    (College of Business Administration University of Wisconsin -La Crosse, La Crosse, WI 54601, USA)

  • Changyu Yang

    (College of Business Administration University of Wisconsin -La Crosse, La Crosse, WI 54601, USA)

Abstract

This paper establishes the relation between the target’s business strategy and M&A transactions. We find that acquirers purchasing an innovation-oriented firm (prospector) experience significantly lower announcement returns and worse long-run operating performance than when they purchase an efficiency-oriented firm (defender). The effect is more pronounced for the acquirer with severe agency problems. Further analysis finds that synergies can be obtained from combining business strategies. We also show that acquirers respond to the presence of a prospector target by using stock payment in their offers.

Suggested Citation

  • Shiang Liu & Changyu Yang, 2024. "Business Strategy and M&A Transactions," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 14(01), pages 1-43, March.
    • Handle: RePEc:wsi:qjfxxx:v:14:y:2024:i:01:n:s2010139224500058
    DOI: 10.1142/S2010139224500058
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    More about this item

    Keywords

    Mergers and acquisitions; innovation-oriented strategy; efficiency-oriented strategy;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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