Acquiring organizational capital

• Main Authors: LI, Peixin, LI, Frank Weikai, WANG, Baolian, ZHANG, Zilong
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Abnormal returns; Mergers and acquisitions; Organizational capital; Synergy; Finance and Financial Management; Organizational Behavior and Theory
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5345; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6344/viewcontent/Acquiring_organizational_capital_Accepted.pdf
• Institution: Singapore Management University

Organizational capital is the accumulation and use of private information to enhance economic efficiency for a firm. Theory has argued that organizational capital is typically embodied in employees and the organizational structure, and is hard to transfer across organizations. In this paper, we study whether organizational capital is transferable across firms via mergers. The evidence shows that acquirers gain more from acquiring firms with higher organizational capital and acquirers are also willing to pay a higher premium for higher organizational capital targets. The evidence suggests that acquiring higher organizational capital targets creates synergies which are shared between acquirers and targets.