Determinants of firm-specific thresholds in acquisition decisions
We develop a model to explain why some firms make acquisitions, while other firms with equal performance expectations do not. We argue that the decision to acquire is not strictly a function of expected abnormal returns, but also depends on a firm's unique acquisition threshold. Our model posits that the threshold is determined by governance, managerial competence, synergy with assets in place, and synergy with growth options. Our empirical findings, drawn from a sample of over 27 000 US acquisitions, offer strong support for the model, suggesting that firms with low thresholds may choose to invest despite comparatively low abnormal returns. Copyright © 2007 John Wiley & Sons, Ltd.
Year of publication: |
2008
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Authors: | Folta, Timothy B. ; O'Brien, Jonathan P. |
Published in: |
Managerial and Decision Economics. - John Wiley & Sons, Ltd., ISSN 0143-6570. - Vol. 29.2008, 2-3, p. 209-225
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Publisher: |
John Wiley & Sons, Ltd. |
Saved in:
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