Corporate M&A, Firm Performance, and Innovation-Evidence from the US Market

Zitong Gan

doi:10.54254/2977-5701/13/2024128

Research Article

Open access

Published on 20 November 2024

Download pdf

Gan,Z. (2024). Corporate M&A, Firm Performance, and Innovation-Evidence from the US Market. Journal of Applied Economics and Policy Studies,13,46-54.

Export citation

Corporate M&A, Firm Performance, and Innovation-Evidence from the US Market

Zitong Gan *^,1,

¹ Peking University

* Author to whom correspondence should be addressed.

https://doi.org/10.54254/2977-5701/13/2024128

Abstract

The literature identifies a range of factors influencing M&A motivations, including financial and legal constraints, as well as political uncertainty. The significance of M&A in the market is substantial, as it fosters market consolidation, resource optimization, and industry innovation. This study examines the effects of corporate mergers and acquisitions (M&A) on firm performance and innovation, with a focus on relevant data and trends within the U.S. market. An analysis of over 50,000 firms in the United States reveals that since 1975, more than 75% of companies have participated in M&A activities, with this proportion rising over time. Key sectors include healthcare services and semiconductors. The research demonstrates that successful M&A not only enhances firm size and profitability but also stimulates economic growth in associated industries and regions. These findings offer valuable insights into corporate development strategies and market dynamics, providing important information for both companies and policymakers.

Keywords

Mergers and Acquisitions (M&A), innovation, firm size, two-way fixed effect

View pdf

References

[1]. Healy, P. M., Palepu, K. G., & Ruback, R. S. (1992). Does corporate performance improve after mergers? Journal of Financial Economics, 31, 135–175.

[2]. Moeller, S. B., Schlingemann, F. P., & Stulz, R. M. (2005). Wealth destruction on a massive scale? A study of acquiring-firm returns in the recent merger wave. Journal of Finance, 60(2), 757–782.

[3]. Officer, M. S. (2003). Termination fees in mergers and acquisitions. Journal of Financial Economics, 69(3), 431–467.

[4]. Julio, B., & Yook, Y. (2012). Political uncertainty and corporate investment cycles. Journal of Finance, 67(1), 45–83.

[5]. Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. Quarterly Journal of Economics, 131(4), 1593–1636.

[6]. Blundell, R., Griffith, R., & Van Reenen, J. (1995). Dynamic count data models of technological innovation. Economic Journal, 105(429), 333–344.

[7]. Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2005). Financial and legal constraints to firm growth: Does firm size matter? Journal of Finance, 60(1), 137–177.

[8]. Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2008). Financing patterns around the world: Are small firms different? Journal of Financial Economics, 89(3), 467–487.

[9]. Benfratello, L., Schiantarelli, F., & Sembenelli, A. (2008). Banks and innovation: Microeconometric evidence on Italian firms. Journal of Financial Economics, 90(2), 197–217.

[10]. Bertrand, M., & Schoar, A. (2003). Managing with style: The effect of managers on firm policies. Quarterly Journal of Economics, 118(4), 1169–1208.

[11]. Belliveau, M. A., O’Reilly, C. A., & Wade, J. B. (1996). Social capital at the top: Effects of social similarity and status on CEO compensation. Academy of Management Journal, 39(6), 1568–1593.

[12]. Black, B., Jang, H., & Kim, W. (2006). Does corporate governance predict firms’ market values? Evidence from Korea. Journal of Law, Economics, and Organization, 22(2), 366–413.

[13]. Blonigen, B., & Pierce, J. R. (2015). The effect of mergers and acquisitions on market power and efficiency.

[14]. Bena, J., & Li, K. (2014). Corporate innovations and mergers and acquisitions. Journal of Finance, 69(5), 1923–1960.

[15]. Hoberg, G., & Phillips, G. (2010). Product market synergies and competition in mergers and acquisitions: A text-based analysis. Review of Financial Studies, 23(10), 3773–3811.

[16]. Sevilir, M., & Tian, X. (2012). Acquiring innovation. Journal of Financial Economics, 104(3), 492–512.

[17]. Aghion, P., Bloom, N., Blundell, R., Griffith, R., & Howitt, P. (2005). Competition and innovation: An inverted-U relationship. Quarterly Journal of Economics, 120(2), 701–728.

[18]. Phillips, G., & Zhdanov, A. (2013). R&D and the incentives from merger and acquisition activity. Review of Financial Studies, 26(1), 34–78.

[19]. Entezarkheir, M., & Moshiri, S. (2018). Innovation spillover and merger decisions. Empirical Economics.

[20]. Hackbarth, D., & Morellec, E. (2008). Stock returns in mergers and acquisitions. Journal of Finance, 63(3), 1213–1252.

[21]. Federal Trade Commission. (n.d.). Evidence on mergers and acquisitions.

[22]. Cui, W., & Wu, H. (2023). Knowledge spillover and spatial innovation growth: Evidence from China’s Yangtze River Delta. Sustainability, 15(19), 14370.

[23]. Rohra, N., & Anita. (2023). Impact of mergers & acquisitions: A critical review of literature. Academy of Entrepreneurship Journal, 29(Special Issue 3). University of Delhi.

Cite this article

Gan,Z. (2024). Corporate M&A, Firm Performance, and Innovation-Evidence from the US Market. Journal of Applied Economics and Policy Studies,13,46-54.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

Disclaimer/Publisher's Note

The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.

About volume

Journal：Journal of Applied Economics and Policy Studies

Volume number: Vol.13

ISSN：2977-5701(Print) / 2977-571X(Online)

© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license. Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open access policy for details).