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Prior performance characteristics of related and unrelated acquirers
Author(s) -
Park Choelsoon
Publication year - 2003
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.310
Subject(s) - profitability index , diversification (marketing strategy) , business , industrial organization , event study , event (particle physics) , marketing , economics , finance , paleontology , context (archaeology) , physics , quantum mechanics , biology
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.