Misvaluation and technological acquisitions: An empirical study and mechanism analysis

Area of Science:

• Corporate Finance
• Innovation Management
• Capital Markets

Background:

• Mergers and acquisitions (M&A) are key to technological advancement.
• Industry overvaluation's role in driving M&A is under-explored.
• Understanding capital market impacts on real economy is crucial for emerging markets.

Purpose of the Study:

• To investigate how industry-level overvaluation influences technological acquisitions.
• To examine the moderating role of financial constraints in this relationship.
• To assess the impact of such acquisitions on acquirer innovation output.

Main Methods:

• Utilizing merger and acquisition (M&A) data from Chinese listed firms (2007-2022).
• Employing econometric analysis to confirm the relationship between industry overvaluation and technological acquisitions.
• Conducting robustness checks to validate findings.

Main Results:

• Industry-level overvaluation significantly promotes technological acquisitions.
• Firms with higher financial constraints depend more on industry overvaluation for acquisitions.
• Technological acquisitions driven by overvaluation enhance acquirer innovative output.

Conclusions:

• Industry overvaluation acts as a catalyst for technological M&A.
• Financial constraints amplify the effect of overvaluation on acquisition decisions.
• This research contributes to misvaluation-driven M&A literature and provides insights into capital market efficiency in emerging economies.