Business Strategy and M&A Transactions

Shiang Liu and Changyu Yang ()
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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

Quarterly Journal of Finance (QJF), 2024, vol. 14, issue 01, 1-43

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.

Keywords: Mergers and acquisitions; innovation-oriented strategy; efficiency-oriented strategy (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S2010139224500058

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