R&D investment as a signal in corporate takeovers
AbstractCritics of takeovers usually argue that takeover threats may reduce target firms' R&D intensity. However, we find that under takeover threats, target firms may nevertheless increase R&D investment in order to signal their compatibility with the acquiring firm. The identity of the acquired firm depends on the market size and target firms' efficiency and compatibility. Target firms may affect this result investing in R&D. Through R&D investments, these firms signal potential outsiders the kind of competition they may face and force them to accept lower takeover offers.
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Bibliographic InfoPaper provided by Facultad de Ciencias Económicas de la ULPGC in its series Documentos de trabajo conjunto ULL-ULPGC with number 2004-07.
Length: 29 pages
Date of creation: Jul 2004
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takeover; signaling; bargaining power; fitting company.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-13 (All new papers)
- NEP-COM-2004-06-13 (Industrial Competition)
- NEP-INO-2004-06-13 (Innovation)
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