title: Essays on M&amp;As: the effect of political ideology divergence, climate change and technology on M&amp;As
Creators: name: Xue, Yongyi
Publisher: name: University of Reading
Year: 2025

description: This thesis attempts to contribute to the strand of determinants of mergers and 
acquisitions (M&amp;As) and the performance of acquisitions in the US and international 
markets, and it is composed of three main chapters.
The first main chapter examines the role of political ideology divergence (PID) 
between the CEO and board of directors in the context of mergers and acquisitions. 
Using a sample of 2,083 US-listed firms from 2000 to 2020, this study finds that firms 
with greater PID are positively associated with the likelihood of engaging in M&amp;A 
activities. The results demonstrate that CEO risk-taking behaviours, proxied by CEO 
overconfidence, founder CEO, and pay for performance sensitivity, explain this 
positive relationship. Various identification strategies are employed to address 
endogeneity concerns and confirm the robustness of the findings. Furthermore, the 
research suggests that a higher level of PID has a positive effect on post-deal long-term 
stock return and operating performance. This study also finds that monitoring, through 
mechanisms such as board meeting frequency, institutional ownership, and independent 
directors, plays a moderating role in this long-term performance. Overall, these findings 
suggest that PID is a critical determinant of M&amp;A decisions.
The second main chapter investigates the effect of firm-level climate change 
exposures on mergers and acquisitions with global evidence. Using the climate change 
exposures of Sautner et al. (2023), we find that firms facing higher climate change 
exposure exhibit a reduced propensity to initiate and finalise acquisitions while 
allocating more resources to capital expenditures. The increased cost of external 
financing and low consumer confidence help explain the negative relationship between 
climate change exposure and acquisition likelihood. This negative effect of climate 
change exposure is more pronounced for acquirers of relatively small size, with steep 
growth potential, facing financial constraints, and those operating within pro-cyclical 
industries. When undertaking M&amp;As, firms facing higher climate change exposure take 
a longer time to complete a deal and post poor announcement returns and operating 
performance. Several identification strategies address endogeneity concerns and ensure 
the robustness of the findings. Overall, this study emphasises the importance of 
considering climate change risks in M&amp;A decision making.
The third main chapter investigates the post-merger short- and long-run 
performance of technology-related M&amp;As using a global sample. Deals are classified 
according to the technological distance between acquirers and targets. Technologically 
distant pairs lead to higher announcement returns for acquirer shareholders, especially 
when targets are private. In contrast, pure technology deals gain significantly less and 
even adversely affect firm value. The positive wealth effect of technologically distant 
deals is more pronounced when the bidder is in a non-tech industry. Non-tech bidders 
acquiring tech targets have the highest positive change in operating performance among 
all acquisition types, suggesting better integration. Taken together, this study assesses
the short- and long-term performance of technology-related M&amp;As, emphasising that 
technologically distant firms yield higher returns for acquirers while similar technology 
deals are less beneficial and may even reduce value.
This thesis critically analyses the factors influencing the initiation and 
effectiveness of M&amp;As in the US or international markets, encapsulated in three 
chapters. It identifies political ideology divergence (PID) between the CEO and board, 
the impact of climate change exposure, and the technological distance between 
acquirers and targets as key determinants impacting M&amp;A propensity, completion time, 
stock returns, and post-deal performance.