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The stock market evaluation of IPO-firm takeovers

Thorsten V. Braun, Erik Lehmann () and Manuel T. Schwerdtfeger

No 01-11, UO Working Papers from University of Augsburg, Chair of Management and Organization

Abstract: We conduct an event study to assess the stock market evaluation of public takeover announcements. Unlike the majority of previous research, we specifically focus on acquisitions targeted at newly public IPO-firms and show that the stock market positively evaluates these M&As as R&D. However, bidders' abnormal announcement returns are significantly lower for takeovers directed at targets with critical intangible assets and innovative capabilities inalienably bound to their initial owners than for those that have internally accumulated respective resources and capabilities. We explain these findings with the acquirer's post-acquisition dependence on continued access to the IPO-firm founders' target-specific human capital. Our results contribute to literature in that they show that the stock market perceives these potential impediments to successful exploitation of acquired strategic resources and thus identify a potential cause for heretofore mostly inconsistent evidence on bidder abnormal returns in corporate takeovers found in previous research.

Keywords: Ownership Structure; High-Tech IPO-Firms; Mergers & Acquisitions (search for similar items in EconPapers)
JEL-codes: D23 G32 G34 L22 M13 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:auguow:0111

DOI: 10.2139/ssrn.1803358

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