סמינר במימון חשבונאות

Speaker: Avner Kalay TAU

Abstract: This paper examines the relationship between the acquirer’s investment policy and the market revision of the estimated stand-alone value of the firm upon the acquisition announcement. We capture the market’s reaction to the revealed shift in the firm’s investment policy from internal investment to acquisitions in a sample of 3,192 first-time acquirers. The results show that the market reacts less positively to announcements made by firms with greater prior internal investment than their industry-peers suggesting that the acquisition news reveals to investors that the firm’s internal investment opportunities have peaked. The significant negative relationship between the firm’s investment policy and shareholder gains upon the acquisition announcement is robust to controlling for firm and deal characteristics and it is unrelated to anticipation effects. High-investment acquirers tend to choose high-investment targets further supporting the hypothesis that high growth firms undertake acquisitions with the motive to compensate for the foreseen drop in internal investment opportunities, therefore the acquisition announcement causes the market to revise its estimate on acquirer stand-alone value.