Research On The Impact Of Targets' Innovation On M&A Premium And Short-term Abnormal Return

Since the 21 st century,innovation significantly has promoted economic development,which is becoming the driving force behind economic growth.As for enterprises,when the industry grows to saturation,capital accumulation has not brought benefits to them anymore.Innovation development to a certain extent replaces internal capital accumulation and makes it possible for many enterprises to enhance market competitiveness.M&A has become an important way for enterprises to acquire open innovation and to seek rapid growth and expansion.As an intangible asset,innovation makes an influence on the valuation of target enterprises,which affects the M&A premium.Meanwhile,the stock price of acquirers fluctuates with the occurrence of the M&A transaction,which brings a short-term abnormal return.Targets' innovation has a certain impact on the return of both sides of M&A in the transaction.This article investigates on M&A transactions of A-share listed companies from 2011 to 2016.Using the number of patents target enterprises have as the innovation capability index,and using the difference between the M&A transaction price and the value of targets as the M&A premium.The short-term event study method which chose the event window(5,-5)is used to calculate the cumulative abnormal return of acquiring firm.Then using multiple linear regression to research the impact of target enterprise's innovation on M&A premium and short-term abnormal return.The robustness of the empirical results is then tested by two-stage regression,event window adjustment,and subsample regression.The result shows that the target enterprise's innovation ability significantly affect the M&A premium,and it also has a significant positive relationship with the short-term abnormal return.Through transactions,target enterprises with innovation can obtain M&A premium,and acquiring firms receive corresponding short-term abnormal returns either.This conclusion explains that the current M&A market of China emphasizes innovation ability.Finally,this article finds that the capital market can positively evaluate innovation,and it can also incentives and supports for innovation.