Do newly public acquirers benefit or suffer from their pre‐IPO affiliations with underwriters and VCs?

Asli M. Arikan and Laurence Capron

Strategic Management Journal, 2010, vol. 31, issue 12, 1257-1289

Abstract: We examine whether pre‐IPO affiliations affect post‐IPO corporate events, namely acquisitions. On the one hand, newly public acquirers may benefit from their pre‐IPO affiliations through residual signaling value or/and resource‐related benefits. On the other hand, newly public acquirers may suffer from those affiliations when conflicts of interests arise during the post‐IPO period. Equity underwriters may have incentive to promote non–value‐creating acquisitions (Type II error), and venture capitalists (VCs) may have incentive to forgo strategically important acquisitions (Type I error). Drawing on a sample of 4,029 acquisitions made by 717 newly public firms, we find that on average the announcement of an acquisition by a newly public acquirer elicits a positive response from investors. The market views more favorably the acquisitions announced by newly public acquirers associated with prestigious equity underwriters, but this reaction becomes negative when the lead underwriter is retained as the acquisition advisor. The market reacts more favorably to acquisitions announced by VC‐backed newly public acquirers, but only when those VCs are committed to a longer lockup period. The effects of pre‐IPO affiliations on expected returns are stronger for newly public acquirers with a high intangible resource base and persist throughout the three‐year post‐IPO period (across each subsequent acquisition announcement). Copyright © 2010 John Wiley & Sons, Ltd.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://doi.org/10.1002/smj.861

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:stratm:v:31:y:2010:i:12:p:1257-1289

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0143-2095

Access Statistics for this article

More articles in Strategic Management Journal from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().