Acquisitions and Technology Value Revision
64 Pages Posted: 12 Jun 2019
Date Written: April 30, 2019
Merger announcements cause upward revisions in the market value of target firms' technology peers, whether targets and their peers belong to the same industry or not. Firms having deeper technology overlaps with the targets experience more dramatic price revisions. Consistent with the acquisition probability theory, a firm is more likely to be taken over if at least one of its technology peers has been acquired recently, and peers more vulnerable to acquisitions have greater upward price revisions. Our findings demonstrate that the market for corporate control is an important information source to resolve the uncertainties in technology valuation.
Keywords: technological innovation, technology space, technology similarity, technology peers, merger, acquisition, information, valuation
JEL Classification: G14; G32; G34; D83; O33
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