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Acquiring organizational capital

Author

Listed:
  • Li, Peixin
  • Li, Frank Weikai
  • Wang, Baolian
  • Zhang, Zilong

Abstract

Organizational capital is the accumulation and use of private information to enhance economic efficiency for a firm. Theory has argued that organizational capital is typically embodied in employees and the organizational structure, and is hard to transfer across organizations. In this paper, we study whether organizational capital is transferable across firms via mergers. The evidence shows that acquirers gain more from acquiring firms with higher organizational capital and acquirers are also willing to pay a higher premium for higher organizational capital targets. The evidence suggests that acquiring higher organizational capital targets creates synergies which are shared between acquirers and targets.

Suggested Citation

  • Li, Peixin & Li, Frank Weikai & Wang, Baolian & Zhang, Zilong, 2018. "Acquiring organizational capital," Finance Research Letters, Elsevier, vol. 25(C), pages 30-35.
  • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:30-35
    DOI: 10.1016/j.frl.2017.10.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Organizational capital; Mergers and acquisitions; Synergy; Abnormal returns;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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