(Thesis Abstract) The Post-Merger Value Creation in the Innovative Industries

The high technology and innovative firm mergers have brought attention as the technology and innovations are crucial for the long-term strategy and generate growth for the firms. This thesis analyzes the post-merger on those innovative industries, representing pharmaceutical, telecommunication services and Media & Entertainment mergers. The author examines whether the post-merger in those firms create value for the shareholders and how the firms benefit and create value from the innovation and technology advances. The author exploits the relationship between the post-merger performance and the stock market behavior using the fundamental valuation and the event study. The distinct nature of the innovative industries, which largely depend on their intangible assets or highly spend the R&D activities to boost the revenue, in addition to the short track financial records, have made the valuation analysis challenging.

The author provides evidences that: (i) the initial stock market returns on the firm’s merger announcement are mixed, ranging from negative to positive abnormal returns (ii) the market share is a significant benchmark for these industries, particularly to achieve the economies of scale and to seize the competition under the uncertain future business situation, which in turn, creates value in the long-run (iii) the result of technology and innovations in the post-mergers are cautiously responded by the shareholders in the stock market. To that extent, the stock market delivers positive abnormal returns on technology and innovations that is believed would bring profits (iv) focus on the core businesses are found to have a positive relation with the performance improvement.

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~ by rhyme de ma vie on July 1, 2004.

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