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Journal of Risk and Financial Management is published by MDPI from Volume 6 Issue 1 (2013). Articles in this Issue were published by another publisher in Open Access under a CC-BY (or CC-BY-NC-ND) licence. Articles are hosted by MDPI on mdpi.com as a courtesy and upon agreement with Prof. Dr. Raymond A. K. Cox and Prof. Dr. Alan Wong.
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Mergers and Acquisitions (M&AS) by R&D Intensive Firms

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University of Ontario Institute of Technology, Faculty of Business and Information Technology, 2000 Simcoe Street North, Oshawa, ON, L1H 7K4, Canada
2
Sprott School of Business, Carleton University,1125, ON K1S 5B6, Canada
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Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2009, 2(1), 1-37; https://doi.org/10.3390/jrfm2010001
Published: 31 December 2009
In this study, we evaluate the impact of R&D intensity on acquiring firms’ abnormal returns by examining 925 Canadian completed deals between 1993 and 2002 that have information on R&D expenditures. While examining the returns to acquiring firm shareholders in the R&D intensive firms we evaluate two competing hypotheses: ‘growth potential hypothesis’ and ‘integration failure hypothesis’. According to the ‘growth potential hypothesis’, in light of the growth potential of the targets acquired by R&D intensive firms, investors are likely to react positively. ‘Integration failure hypothesis’ focuses on integration difficulties of a target by an R&D intensive firms and suggests that investor might be skeptical of such acquisitions and react negatively. Our results show that R&D intensity (i.e. R&D expenditure by sales) has a positive and significant effect on cumulative abnormal returns of the acquiring firms around the announcement dates. This implies that market generally favors the M&A deals by R&D intensive firms. An analysis of the differentiating characteristics reveal that R&D firms have a significantly higher growth potential and undertake more stock financed deals compared to the non R&D firms. Further, our results show that there is no significant change in long-term operating performance subsequent to the M&A deals for both R&D firms and non R&D firms. In general, our results show support for ‘growth potential hypothesis’. View Full-Text
Keywords: Mergers and Acquisitions; R&D intensity; Abnormal returns; Long-term performance Mergers and Acquisitions; R&D intensity; Abnormal returns; Long-term performance
MDPI and ACS Style

Dutta, S.; Kumar, V. Mergers and Acquisitions (M&AS) by R&D Intensive Firms. J. Risk Financial Manag. 2009, 2, 1-37.

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