Acquiring Organizational Capital

40 Pages Posted: 17 Feb 2015 Last revised: 4 Jul 2015

Frank Weikai Li

Hong Kong University of Science and Technology - Department of Finance

Zilong Zhang

City University of Hong Kong

Date Written: May 1, 2015

Abstract

Acquisitions of organizational capital produce significant positive gains for acquiring-firm shareholders. Consistent with theories, acquirers benefit more from buying organizational capital when acquirer and target are from related industry, when the deal is stock financed, when target size is large relative to acquirer and when acquirer managers exhibit high ability prior to merger. Acquirers buying high organizational capital targets not only experience higher announcement returns, but also improvement in post-merger operating performance and higher long-run stock returns. Overall, our paper uncovers a new channel where firms can get access to valuable organizational assets and documents it is beneficial for acquirer shareholders.

Keywords: Organizational Capital, Mergers & Acquisitions, Synergy

Suggested Citation

Li, Frank Weikai and Zhang, Zilong, Acquiring Organizational Capital (May 1, 2015). Asian Finance Association (AsianFA) 2015 Conference Paper. Available at SSRN: https://ssrn.com/abstract=2565451 or http://dx.doi.org/10.2139/ssrn.2565451

Frank Weikai Li

Hong Kong University of Science and Technology - Department of Finance ( email )

Clear Water Bay
Kowloon
Hong Kong

Zilong Zhang (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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