Prior performance characteristics of related and unrelated acquirers

Choelsoon Park

101 citations0/0 files storedStrategic Management Journal

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Corporate Finance and Governance International Business and FDI Innovation and Knowledge Management

Abstract

Abstract In the diversification literature, studies, particularly those using accounting‐based performance measures, have found that related diversifiers are more profitable and that related diversifiers are in more profitable industries than unrelated diversifiers. Due to the very nature of these studies based on cross‐sectional data, however, the causal relationship between diversification strategy and performance was not clear. This paper focuses on a single event of a large acquisition, which enables us to better identify the sequential relationships between prior firm profitability, prior industry profitability, and subsequent acquisition strategies. By doing so, this paper makes clearer the causal relationships between firm profitability, industry profitability, and acquisition strategies. Copyright © 2003 John Wiley & Sons, Ltd.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1979Prospect Theory: An Analysis of Decision under Risk 1980Competitive Strategy: Techniques for Analyzing Industries and Competitors 1986Research in Organizational Behavior.1984Choices, values, and frames.1987Managerial Perspectives on Risk and Risk Taking 1992TOP MANAGEMENT TEAM DEMOGRAPHY AND CORPORATE STRATEGIC CHANGE.1981Risk Reduction as a Managerial Motive for Conglomerate Mergers

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