Information Disclosure and the Market for Acquiring Technology Companies
41 Pages Posted: 19 Jun 2019
Date Written: June 6, 2019
The market for acquiring technology-intensive companies is rife with information frictions and valuation challenges. Although such frictions can stifle trading activity, they also provide room for strategic gain. We investigate this dual role of information frictions in takeover markets by exploiting an institutional reform that released technological information in U.S. patent applications to the public domain. Leveraging cross-sectoral variation in the magnitude of new information disclosure, we find that greater disclosure leads to an uptick in acquisitions. In line with predictions from strategic factor market theory, however, we find that acquirers profit less, especially when target firms are private. This evidence is consistent with the view that information disclosure facilitates trade in takeover markets yet has a leveling effect on the returns to acquirers.
Keywords: Mergers and acquisitions, Patent disclosure, Information disclosure, Acquisition performance, AIPA
JEL Classification: O32, O34, G34, G14
Suggested Citation: Suggested Citation