Title: When and how previous experience affects the stock market reaction to business combinations

Authors: Pablo Sánchez-Lorda; Esteban García-Canal

Addresses: Dpto. Administración de Empresas, Facultad de CC. Económicas y Empresariales, Universidad de Oviedo, Avda. Cristo s/n. 33071 Oviedo, Spain ' Dpto. Administración de Empresas, Facultad de CC. Económicas y Empresariales, Universidad de Oviedo, Avda. Cristo s/n. 33071 Oviedo, Spain

Abstract: In this paper, we analyse to what extent previous experience of the firms affects the investors' valuation of business combinations. We analyse two types of business combinations as alternative means to gain access to external strategic resources: strategic alliances and acquisitions. We point out that the previous experience of the companies in the management of business combinations will positively affect the abnormal returns of these operations. However, if the business combination supposes a diversification of the company, experience affects the investors' valuation of acquisitions and alliances in a different fashion. An empirical study of the investors' valuation of business combinations carried out by European telecom firms between 1990 and 2001 has confirmed these hypotheses.

Keywords: internationalisation; strategic alliances; joint ventures; mergers; acquisitions; telecommunications industry; previous experience; stock market reactions; business combinations; investors; valuations; external resources; strategic resources; abnormal returns; company diversification; telecom firms; Europe; cross-cultural competence; cross-cultural management; cross-cultural transformations; conflict.

DOI: 10.1504/EJCCM.2012.052595

European Journal of Cross-Cultural Competence and Management, 2012 Vol.2 No.3/4, pp.319 - 343

Accepted: 11 Jul 2012
Published online: 29 Jul 2014 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article