Graduation Year

2014

Document Type

Dissertation

Degree

Ph.D.

Degree Granting Department

Finance

Major Professor

Ninon Sutton

Committee Member

Jianping Qi

Committee Member

Christos Pantzalis

Committee Member

Daniel Bradley

Keywords

Alliances; Mergers and Acquisitions; Initial Public Offerings; Signaling; Innovations; Spillover effect

Abstract

ABSTRACT

In the first essay titled "The Value of Strategic Alliances in Acquisitions and IPOs," I investigate how firms' strategic alliance experience affects their valuations as acquisition targets or in IPOs. I propose that strategic alliance experience serves as a valuable signaling device for target and IPO firms, particularly those with more intangible assets and greater opacity. The results show that takeover targets with alliance experience receive higher premiums than those without such experience. More recent alliance experience as well as alliance experience in the same industry also contributes to a larger target gain. Similarly, IPO firms that have alliance experience are shown to obtain higher valuations than those without the experience. Finally, alliance experience increases the likelihood that private firms exit by going public rather than being acquired.

In the second essay titled "For Better or For Worse: The Spillover Effect of Innovation Events on Alliance Partners," I examine the spillover effects of breakthrough innovations on the strategic alliance partners of the innovative firm. I find direct stock market evidence that the shareholders of strategic alliance partners significantly benefit from the spillover effects of these innovations. Multivariate analyses indicate that young and newly listed innovator firms with better growth opportunities generate bigger abnormal returns when announcing innovation events and bring larger spillover effects for their alliance partners with similar characteristics. In addition, I explore the risks associated with alliance partnerships, showing that FDA warning letters cause significant wealth losses for both the innovative firm and their alliance partners.

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