Digital Rights Management System in Corporate Takeover

Abstract

We examine the extent to which digital rights management (DRM) system impacts on mergers and acquisitions’ (M&A) due diligence. We use hand-collected data comprising the full dataset of digital M&A and patent M&A. To measure the performance of target firm at due diligence phase, we introduce market-to-book ratio for business due diligence, return on asset for financial and accounting due diligence, target high-tech industry approach for IT due diligence, environmental score for environmental due diligence, and legal advisor as measurement for performance in legal due diligence. Our findings reveal that target firms with digital right management as a form of digital M&A have lower market-to-book ratio, higher return on asset, higher legal activities, and higher technological approach. Furthermore, target firms with digital right management as a form of patent M&A have higher return on asset, higher legal activities, and lower digital activities. Digital right management system at both levels of digital M&A and patent M&A does not have effect on environmental due diligence. For identification, we employ lagged regressions and propensity score matching of digital/non digital and patent/non patent target firms to make our results more robust.

Keywords: Mergers and acquisitions; due diligence; digital Right Management; digital M&A; intellectual Property

JEL Classification: G34, O34, K11