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Geographic distance and corporate acquisitions: signals from IPO firms
Author(s) -
Ragozzino Roberto,
Reuer Jeffrey J.
Publication year - 2011
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.914
Subject(s) - initial public offering , business , reputation , investment banking , geographical distance , adverse selection , venture capital , finance , monetary economics , accounting , economics , social science , population , demography , sociology
This paper examines acquisitions of firms after they have undergone initial public offerings (IPOs). Combining insights from information economics with recent research on geographic distance in various market settings, the analysis investigates whether the presence or absence of different signals on IPO firms has an impact on the geographic proximity of acquirers. The central proposition we develop and test is that specific characteristics of IPOs—venture capitalist backing, investment bank reputation, and underpricing of issued shares—convey signals on these firms, which can facilitate acquisitions by more remote acquirers who are more likely to face the risk of adverse selection. Copyright © 2011 John Wiley & Sons, Ltd.