EURO 2025 Leeds
Abstract Submission

824. Grow Organically or Through Acquisition to Create Value for the Firm

Invited abstract in session WB-34: Theory of Knowledge, Technology, and Innovation, stream Advancements of OR-analytics in statistics, machine learning and data science.

Wednesday, 10:30-12:00
Room: Michael Sadler LG10

Authors (first author is the speaker)

1. A. D. Amar
Management Department, Seton Hall University
2. Januj Juneja
San Diego State University

Abstract

Our approach assesses growth using total employment or related variables by setting up an SEM system that includes several variables tied to the ability of the firm to grow. The model is applied to the datasets constructed from two samples, one for each mode of growth. For the sample of firms that grow by acquisition, we start by identifying all acquisitions using the SDC database. After computing the return to the acquirer by treating the acquisition date as an event, we form our main variable of interest as a growth factor using the Black-Scholes equation treating the acquisition as an option to expand the operation of the firm. Using WRDS and findings from recent works to determine the ten most critical variables of growth in two stages using OLS by controlling for potential autocorrelation and heteroskedasticity bias. We repeat this for organic growth firm by starting with identifying those firms that did not undergo growth by acquisition over the same sample period and had available returns within a short window of time of the event date. We highlight the advantages of growth through acquisition as a source of value creation relative to organic growth and so of the myriad possible theoretical reasons for this advantage. We focus on the longer time to grow through organic means relative to acquisition and compute that time differential using a recently proposed timing algorithm constructed based upon the Fourier series and conclude with directions for future research.

Keywords

Status: accepted

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