The Role of R&D in Cross-Border Mergers & Acquisitions

31 Pages Posted: 19 Jul 2010

See all articles by Amalia Di Iorio

Amalia Di Iorio

La Trobe Business School

Michael Graham

Stockholm University - School of Business

Terrence A. Hallahan

Victoria University

Richard A. Heaney

University of Western Australia

Date Written: July 2010

Abstract

This study examines the synergy and internalization hypotheses for international acquisitions using a sample of Australian companies with particular focus on the relationship between the synergistic gains and R&D capabilities of both the acquirer and target. We focus on three research questions: (1)Are significant cumulative abnormal returns observed for the Australian acquirers on announcement of cross-border acquisitions? (2)Are significant cumulative abnormal returns observed for R&D intensive Australian acquirers during cross-border acquisitions? and (3) Does R&D intensity explain cross sectional variation in wealth effects on announcement of cross-boarder acquisitions? We find that, overall, significant and positive cumulative abnormal returns are observed for the Australian acquirers in cross-border acquisitions, with the most pronounced effect apparent for R&D intensive Australian acquirers. Consistent with previous studies, target firm shareholders experienced positive and significant abnormal returns. Taken together, these results indicate the existence of synergistic gains, which are shared between acquirer and target shareholders. When we regress the target firms’ characteristics on acquirers CARs we find strong and consistent evidence of a positive influence of targets firms R&D intensity on acquirers CARs, suggesting shareholders’ wealth increases due to the increasing scale for which the target companies R&D intangible assets are applied. However, when target CARs are regressed on acquirers’ financials to explore whether acquirer characteristics can explain target wealth gains, acquirer firms’ R&D intensity is found to have a significant and negative effect of target firms’ CARs.

Keywords: Cross-border M&A’s, Synergy, Foreign Direct Investment

JEL Classification: G34, O3

Suggested Citation

Di Iorio, Amalia and Graham, Michael and Hallahan, Terrence A. and Heaney, Richard A., The Role of R&D in Cross-Border Mergers & Acquisitions (July 2010). Australian Centre for Financial Studies - Finsia Banking and Finance Conference 2010, Available at SSRN: https://ssrn.com/abstract=1645119 or http://dx.doi.org/10.2139/ssrn.1645119

Amalia Di Iorio (Contact Author)

La Trobe Business School ( email )

Department of Economics and Finance
Victoria 3552, 3086
Australia

Michael Graham

Stockholm University - School of Business ( email )

Roslagsvägen 1010
Stockholm, SE-106 91
Sweden
+ 46 8 674 7451 (Phone)

HOME PAGE: www.fek.su.se

Terrence A. Hallahan

Victoria University ( email )

School of Accounting and Finance
300 Flinders Street
Melbourne, 8001
Australia

Richard A. Heaney

University of Western Australia ( email )

Crawley
Perth, Western Australia 6009
Australia
0414700799 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
129
Abstract Views
976
rank
240,541
PlumX Metrics