Acquisitions and Investment

We derive a simple theoretical framework in which acquisitions are treated as an alternative way of obtaining capital goods. Our framework predicts that both investment and acquisitions are positively related to a firm’s shadow value of capital. We transform our theoretical specification into an econometric model, which we then estimate using a long panel data‐set spanning 503 US firms over 15 consecutive years. Our results indicate that an increase in the shadow value of capital has approximately the same proportionate effect on the level of acquisitions as it does on investment. This result proves to be robust to a variety of alternative specifications

Business · Capital (architecture) · Capital investment · Econometrics · Economics · Investment (military) · Microeconomics · Panel data · Set (abstract data type) · Shadow (psychology) · Shadow price · Statistics · Value (mathematics) · Variety (cybernetics) · Capital Investment and Risk Analysis · Computer Science · Corporate Finance and Governance · Economic theories and models · Finance · Mathematics