Stock Market Valuation, Profitability and R&D Spending of the Firm: The Effect of Technology Mergers and Acquisitions

Juha‐Pekka Kallunki, Elina Pyykkö and Tomi Laamanen

Journal of Business Finance & Accounting, 2009, vol. 36, issue 7‐8, 838-862

Abstract: Abstract: In this paper, we investigate whether a firm can enhance the effect of its R&D spending on its current market value and future profitability through technology‐oriented M&As. On the basis of an analysis of 1,879 M&As, we find that when a technology firm acquires another technology firm, the magnitude of the stock price response to the R&D spending of an acquirer increases by 107% in the year of the M&A. In contrast, we find no such increase in the stock price response to the R&D spending of a non‐technology acquirer. We also find that technology acquirers are more successful in converting their R&D spending into positive future profitability than non‐technology acquirers. Our results are robust for different alternative specifications of our model and when various firm differences are controlled for.

Date: 2009
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https://doi.org/10.1111/j.1468-5957.2009.02161.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:36:y:2009:i:7-8:p:838-862

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