Comprehensive vs. Speed: Investor Reactions to Due Diligence Length under Varying Industry Conditions
Journal
Strategic Organization
ISSN
1476-1270
ISSN-Digital
1741-315X
Type
journal article
Date Issued
2025-09-10
Author(s)
Abstract
Acquisition decision-making often entails significant information asymmetries, which acquirers seek to mitigate through comprehensive due diligence analyses. While due diligence can help reduce the risk of acquisition failure, conducting thorough due diligence also slows down the decision-making process, consumes resources, and delays the realization of synergies. Drawing on decision comprehensiveness theory, we argue that the relationship between due diligence speed and acquirer stock market returns follows an inverted U-shaped curve, in which the optimal point is contingent on the decision-making context. Based on an analysis of a sample of 501 acquisitions of S&P 1500 firms, we find support for the existence of a curvilinear relationship and the moderating effects of industry complexity and dynamism, but not industry munificence. Our findings contribute to an enhanced understanding of the due diligence process and extend the existing research on the influence of external contingency factors in optimizing comprehensiveness and speed in strategic decision-making.
Language
English
Keywords
Acquisitions
Topics and Perspectives
Decision Making
Regression Analysis
Research Methods
Decisions under risk/uncertainty
Mergers
HSG Classification
contribution to scientific community
Refereed
yes
Publisher
SAGE Publications
Pages
55
Division(s)
Contact Email Address
tomi.laamanen@unisg.ch
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SO_Cpmprehensive vs Speed-Investor Reactions to Due Diligence Length under Verying Industry Conditions_2025.pdf
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1000.65 KB
Format
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