Corporate innovation, likelihood to be acquired, and takeover premiums

Wu, Szu-Yin; Chung, Kee H.

doi:10.1016/j.jbankfin.2019.105634

Cited by 9 publications

(6 citation statements)

References 48 publications

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“…In addition, Kahn and Candi (2021) document that the effect of innovation strategy is moderated by firm size and type of offering (i.e., product or service). Jennifer Wu and Chung (2019) also find that takeover premium is positively related to target's innovation output, which suggests that the acquisition of innovation is a key motive for corporate takeovers.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 98%

Are overconfident CEOs better able to transform innovation into firm value?—Evidence from the United States

Jung

Park

2023

International Finance

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We use innovation premium (IP), proposed by Forbes, as a proxy for firm innovation to present evidence that firm value is positively associated with IP. The positive impact of the IP on firm value is amplified by overconfident CEOs, particularly in the high‐tech and biotech industries with a high proportion of intellectual capital and intangible assets. In a series of tests, we confirm that the results hold after controlling for endogeneity. our findings are consistent with the notion that the beneficial effect of corporate innovations generated by overconfident CEOs exists primarily in industries where innovations are in critical demand.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 98%

Are overconfident CEOs better able to transform innovation into firm value?—Evidence from the United States

Jung

Park

2023

International Finance

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“…Specifically, acquirers with strong marketing capabilities, in the post-acquisition context, can adeptly identify and thoroughly assess the acquired firms' customer base and product advantages, swiftly formulating strategies aligned with the needs of the acquired firms' customers (Homburg and Bucerius, 2005; Rahman et al ., 2021). Consequently, stakeholders are more likely to perceive a high premium as reflective of the acquiring firm’s capabilities aimed at obtaining superior market information, providing substantial evidence for subsequent resource integration, rather than mere hubris (Wu and Chung, 2019). This, in turn, contributes to enhancing positive post-acquisition performance.…”

Section: Theoretical Background and Hypothesesmentioning

confidence: 99%

Do takeover premiums hurt post-acquisition performance? – Marketing capabilities matter!

Han,

Sun,

Wen

et al. 2024

MIP

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PurposeThe primary aim of this study is to resolve a longstanding debate concerning the impact of takeover premiums on post-acquisition performance. Specifically, we aim to examine how acquirers' marketing capabilities and payment methods moderate the relationship between takeover premiums and post-acquisition performance.Design/methodology/approachThis study employs linear regression to examine the relationship between acquirers' marketing capabilities, payment methods, takeover premiums and post-acquisition performance in the Chinese manufacturing industry. Data for the analysis were collected from both mergers and acquisition (M&A) announcements and the China Stock Market & Accounting Research Database (CSMAR), covering 1,169 acquisitions from 2012 to 2021.FindingsThe results indicate that acquirers' marketing capabilities moderate the impact of takeover premiums on post-acquisition performance. When acquirers possess strong marketing capabilities, takeover premiums increase post-acquisition performance. Conversely, when acquirers lack strong marketing capabilities, takeover premiums are not significantly related to post-acquisition performance. Additionally, it is noteworthy that takeover premiums show a positive correlation with post-acquisition performance, irrespective of the payment methods employed by acquirers for target firms.Originality/valueGiven that takeover premiums are essential for acquiring resources from target firms, it is crucial to maximize the value of these acquired resources. Our findings suggest that acquirers with weaker marketing capabilities before the deal should consider a more conservative approach to pricing target firms.

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“…This resistance could impact various aspects, such as the potential for future takeover opportunities or for private benefits for large shareholders (Dimopoulos & Sacchetto, 2014). (Betton et al, 2008;Lin, 2016;Malmendier et al, 2016;Schwert, 1996;Wu & Chung, 2019). For example, Bugeja and Walter (1995) find that bid premiums are positively associated with the prior financial performance of target firms.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…A prominent strand of management and finance literature analyses bid premiums extensively from the perspective of the targets' characteristics (Betton et al, 2008; Lin, 2016; Malmendier et al, 2016; Schwert, 1996; Wu & Chung, 2019). For example, Bugeja and Walter (1995) find that bid premiums are positively associated with the prior financial performance of target firms.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Lin (2016) show that the level of cultural similarity between the target and acquiring firms is associated with bid premiums. Wu and Chung (2019) find that the innovation activities of target firms are positively correlated with high takeover premiums, especially when the technological proximity of the target firm is similar to the acquiring firms. Thraya and Hamza (2019) find that the contestability of the bid leads to a higher bid price.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

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The sustainable development trend in environmental, social, and governance issues and stakeholder engagement: Evidence from mergers and acquisitions in China

2023

Corp Soc Responsibility Env

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This study investigates how potential target firms' environmental, social, and governance (ESG) performance affects bid premiums during the merger and acquisition (M&A) process. Using a sample of 5658 M&A deals between 2009 to 2020, we provide new evidence that target firms' ESG rating is positively correlated to bid price, particularly when the target firm scores highly on their singular environmental and governance ratings, whereas the targets with high single social ratings alone are not correlated to bid price. Our results also implied that when the target has lower environmental and governance performance, M&A deals are less likely to face bid premiums. We additionally find that the target firms of non‐state‐owned enterprises (non‐SOEs) are more likely to have a higher bid price as opposed to state‐owned enterprises' (SOEs) target firms. Additionally, we find that targets' ESG rating is positively correlated to target shareholder value creation, as well as being positively correlated to short bid deal negotiation times. Overall, our findings are in line with target‐resistance theory, which states that high ESG performance targets can use their ESG advantages to increase their bid price, as well as increase stakeholder engagement and generation of post‐M&A synergy.

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Corporate innovation, likelihood to be acquired, and takeover premiums

Cited by 9 publications

References 48 publications

Are overconfident CEOs better able to transform innovation into firm value?—Evidence from the United States

Are overconfident CEOs better able to transform innovation into firm value?—Evidence from the United States

Do takeover premiums hurt post-acquisition performance? – Marketing capabilities matter!

The sustainable development trend in environmental, social, and governance issues and stakeholder engagement: Evidence from mergers and acquisitions in China

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