The impact of industry IPOs on acquisitions of new ventures: An information spillovers perspective
Journal
Long Range Planning
Journal Volume
54
Journal Issue
1
Date Issued
2021
Author(s)
Reuer J.J.
Abstract
The announcements of initial public offerings (IPOs) in an industry can convey to potential acquirers information about the growth prospects of the rivals of ventures undertaking IPOs, thereby increasing their likelihood of being acquired. We investigate several information diffusion mechanisms to examine how information conveyed by industry IPOs shape such acquisitions. We also develop a contingency perspective on how the value of such information spillovers will vary across acquirers. Our empirical evidence indicates that information in the IPO market channeled via media coverage, analyst coverage, and IPO underpricing raises an acquirer's likelihood of acquiring a private venture. Thus, the information intermediated as a consequence of IPOs relaxes the constraints of an acquirer's information environment, and this is particularly the case for diversifying acquirers. ? 2019 Elsevier Ltd
Subjects
Information spillovers
Initial public offerings
Mergers and acquisitions
Ventures
Enterprise resource planning
Finance
Analyst coverages
Contingency perspective
Growth prospects
Information diffusion
Information environment
data acquisition
economic development
economic growth
merger
spillover effect
Type
journal article