High-Reputation Firms and Their Differential Acquisition Behaviors

摘要

Research summary: Emerging reputation research suggests that high-reputation firms will act to maintain their reputations in the face of high expectations. Yet, this research remains unclear on how high-reputation firms do so. We advance this research by exploring three questions related to high-reputation firms' differential acquisition behaviors: Do high-reputation firms make more acquisitions than similar firms without this distinction? What kind of acquisitions do they make? How do investors react to high-reputation firms' differential acquisition behaviors? We find that high-reputation firms make more acquisitions and more unrelated acquisitions than other firms. Yet, we also find that investors bid down high-reputation firms' stock more than other firms' in response to acquisition announcements, suggesting that investors are skeptical of how high-reputation firms maintain their reputations.