The Ohio State University
Fisher College of Business
307 Fisher Hall
2100 Neil Avenue
Columbus, Ohio 43210-1144
Institutional Affiliation: Kent State University
NBER Working Papers and Publications
|September 2011||Corporate Acquisitions, Diversification, and the Firm's Lifecycle|
with : w17463
Lifecycle theories of mergers and diversification predict that firms make acquisitions and diversify when their internal growth opportunities become exhausted. Free cash flow theories make similar predictions. In contrast to these theories, we find that the acquisition rate of firms (defined as the number of acquisitions in an IPO cohort-year divided by the number of firms in that cohort-year) follows a u-shape through their lifecycle as public firms, with young and mature firms being equally acquisitive but more so than middle-aged firms. Firms that go public during the merger/IPO wave of the 1990s are significantly more acquisitive early in their public life than firms that go public at other times. Young public firms have a lower acquisition rate of public firms than mature firms, but ...
Published: Asli Musaoglu Arikan & René Stulz, 2012. "Corporate Acquisitions, Diversification, and the Firm’s Lifecycle," Academy of Management Proceedings, vol 2012(1).