Experience spillover effects on firm performance: evidence from acquisitions and divestitures

Abstract

This study examines the role of acquisition experience on divestiture performance and vice versa. The sample includes 47,684 firm-years and 28,143 unique public US companies that have executed acquisitions or divestitures between January 2000 and December 2020. I find that greater acquisition experience is associated with lower divestiture announcement returns and greater divestiture experience has an insignificant impact on acquisition announcement returns. However, in both scenarios the interaction term between both experiences is statistically and economically significant. This suggests that firms benefit from greater diverse experience and show greater strategic and managerial flexibility.