Drivers of Firm Valuation Following the Merger or Acquisition of Social Ventures

Purpose: We attempted to identify drivers of firm valuation following the merger or acquisition of a social venture. Research design, data, and methodology: Depending heavily on the resourcebased theory of firm, we developed a model explaining drivers of firm valuation following the merger or acquisition of a social venture. Results: The results of the our study were summarized as follows: First, the high a sset v alue o f t he acquired social v enture h as a p ositive ef f ect on the excess return of the acquired company. Second, the business suitability of the acquired company and the acquired social venture has a positive effect on the generation o f excess revenue a fter mergers a nd a cquisitions. Third, the business suitability of the acquired company and the acquired social venture positively controls the relationship between the high asset value of the acquired company and the excess return of the acquired company. Fourth, the acquisition company’s brand strategy has a positive effect on the generation of excess revenue after the acquisition and merger of social ventures. Fifth, the acquired company’s brand strategy positively controls the relationship between the high asset value of the acquired social venture and the acquired company’s excess return. Sixth, t he l evel o f business diversification of t he acquired company negatively affects value creation after the acquisition and merger of social ventures. Finally, the level of business diversification of the acquired company positively controls the relationship between the high asset value of the a cquired social v enture and t he e xcess return o f the a cquired venture. Implications: We analyzed the d if f erence between the success and f ailure o f a firm f ollowing the merger and/or a cquisition o f a social venture, a ccording to the response to the firm. Based on the results of the current study, we expected to provide an answer to what f actors managers should consider to merger and acquire a social venture to attain competitive advantage.