The Stock Market’s Valuation of R&D and Market Concentration in Horizontal Mergers

The Stock Market’s Valuation of R&D and Market Concentration in Horizontal Mergers It is well documented that acquirers often pay a large premium to acquire companies in related industries. There are many explanations as to the source of this premium. This study isolates two variables, R&D-intensity and market concentration, and assesses their influence individually and jointly on the deal premium. The results indicate that higher market concentration levels have a negative effect on the deal premium, while higher acquirer R&D-intensity has a positive influence, if the merger could result in a high market concentration level. Furthermore, deal premiums are greater in selected industries and in smaller deal sizes. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

The Stock Market’s Valuation of R&D and Market Concentration in Horizontal Mergers

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Publisher
Springer Journals
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-010-9262-8
Publisher site
See Article on Publisher Site

Abstract

It is well documented that acquirers often pay a large premium to acquire companies in related industries. There are many explanations as to the source of this premium. This study isolates two variables, R&D-intensity and market concentration, and assesses their influence individually and jointly on the deal premium. The results indicate that higher market concentration levels have a negative effect on the deal premium, while higher acquirer R&D-intensity has a positive influence, if the merger could result in a high market concentration level. Furthermore, deal premiums are greater in selected industries and in smaller deal sizes.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Sep 22, 2010

References

  • The year in review: Economics at the Antitrust Division, 2005-2006
    Armington, E.; Emch, E.; Heyer, K.
  • New evidence and perspectives on mergers
    Andrade, G.; Mitchell, M.; Stafford, E.

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