Stock Market Valuation, Profitability and R&D Spending of the Firm: The Effect of Technology Mergers and Acquisitions

Item Type Journal paper
Abstract

In this paper, we investigate whether a firm can enhance the effect of its R&D spending on its current market value and future profitability through technology-oriented M&As. On the basis of an analysis of 1,879 M&As, we find that when a technology firm acquires another technology firm, the magnitude of the stock price response to the R&D spending of an acquirer increases by 107% in the year of the M&A. In contrast, we find no such increase in the stock price response to the R&D spending of a non-technology acquirer. We also find that technology acquirers are more successful in converting their R&D spending into positive future profitability than non-technology acquirers. Our results are robust for different alternative specifications of our model and when various firm differences are controlled for.

Authors Kallunki, Juha-Pekka; Lämpsä, Elina & Laamanen, Tomi
Journal or Publication Title Journal of Business Finance and Accounting
Language English
Subjects economics
HSG Classification contribution to scientific community
Refereed Yes
Date September 2009
Publisher Blackwell
Place of Publication Oxford
Volume 36
Number 7-8
Page Range 838-862
Number of Pages 25
ISSN 0306-686X
ISSN-Digital 1468-5957
Publisher DOI 10.1111/j.1468-5957.2009.02161.x
Depositing User Prof. Dr. Tomi Laamanen
Date Deposited 25 Jan 2013 15:32
Last Modified 23 Aug 2016 11:15
URI: https://www.alexandria.unisg.ch/publications/219930

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Citation

Kallunki, Juha-Pekka; Lämpsä, Elina & Laamanen, Tomi (2009) Stock Market Valuation, Profitability and R&D Spending of the Firm: The Effect of Technology Mergers and Acquisitions. Journal of Business Finance and Accounting, 36 (7-8). 838-862. ISSN 0306-686X

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https://www.alexandria.unisg.ch/id/eprint/219930
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