Research and Development Expenditure and Takeover Probability
Date Issued
2015
Date
2015
Author(s)
Chen, Chun-Fan
Abstract
For increasing growth opportunity, firm will improve the its production technology by internal resources or external resources. Through internal resources, firm inject a lot of resource in research and development activities for raising long-term business value (Samuel H. Szewczyk, George P. Tsetsekos, and Zaher Zantout, 1996); external resources is using mergers and acquisitions way to enhence its technology and then capture the company''s future growth opportunities (Higgins and Rodriquez, 2006). However Duqi, Jaafar and Giuseppe (2015) demonstrated that investment in research and development will result in information asymmetry which occurs between outside investors and manager, because research and development activities could not be understood by investor. Thus, investors would make research and development investment undervalued. According to Rhodes, Robinson and Viswanathan (2005), mispricing plays an important factor in M & A activity. Therefore, this study analyzed the relation between research and development intensity and takeover probability. The empirical analysis found that the research and development intensity has positive effect on takeover probability. As for the production of high-tech industry, the effect of research and development intensity on takeover probability is more significant.
Subjects
Takeover
Research and Development
Information Asymmetry
Type
thesis