Abstract
AbstractDoes innovation drive mergers and acquisitions in the financial sector? This issue is challenging because classical measures of innovation are unavailable in the financial sector. Thus, we introduce an innovation measure that can be used for financial firms. Considering US financial deals, we highlight the impact of a financial firm's innovative activities on the likelihood of becoming an acquirer or a target. We detect a ‘like buys like’ effect, implying that financial mergers and acquisitions are more likely when firms are at a similar level of innovation. We further show that this effect is associated with greater synergistic value.
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