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Cohabitation before marriage: do prior alliances enhance post-merger performance?

Zhaozhao He (), Han Yu and Lijing Du
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Zhaozhao He: University of New Hampshire
Han Yu: Southern Connecticut State University
Lijing Du: Towson University

Review of Quantitative Finance and Accounting, 2020, vol. 54, issue 4, No 6, 1315-1349

Abstract: Abstract We investigate the impact of prior alliance relationships on subsequent mergers between partner firms. We argue that an acquirer’s prior alliance experience with the target reduces information asymmetry, which helps improve acquisition performance. Alternatively, agency problems arising from familiarity may lead to inefficient decision making. Examining mergers between 1986 and 2014, we find evidence that prior alliance collaboration is positively associated with the acquirer’s long-term profitability and growth. This positive effect is more pronounced when target-specific learning and experience are more crucial to merger success, such as targets in knowledge-intensive or organizational-capital-intensive industries as well as cross-industry mergers. However, we cannot formally rule out the possibility that our results are partly driven by the small size of our sample.

Keywords: Mergers and acquisitions; Strategic alliance; Post-merger performance; Information asymmetry; Learning and resources sharing (search for similar items in EconPapers)
JEL-codes: D80 G34 L24 L14 O30 O32 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11156-019-00826-3

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