This dissertation consists of three related studies that explore the effects of performance feedback on the timing of acquisitions, the direction of diversification, and the resulting acquirer returns. The first study investigates behavioral explanations for the timing of corporate acquisitions. The focus is on the effects of performance feedback, slack, and proximity to bankruptcy. I use event history modeling to explain the hazard of acquisitions among U.S. manufacturing firms from 1980 to 2000, and find that firms performing above and below aspirations display different propensities to engage in acquisitions. The results indicate acquisition activity increases as performance rises among firms perform ions. Slack shows a positive relation with acquisitions while financial distress shows support for threat rigidity. The study also finds support for shifts in the focus of attention between survival, aspirations, and slack. The second study investigates how performance discrepancy affects the type of acquisition. Analyzing the trend of acquisitions among U.S. manufacturing firms from 1984 to 1996, I find that horizontal acquisitions are largely explained by performance feedback and the ensuing local search. Problemistic search leads to horizontal acquisitions for firms performing below aspirations while diversifying acquisitions are more likely by firms performing persistently below their aspirations and engaged in distant search. The third study investigates the acquirer returns to acquisitions that result in high than firms performing above their aspirations. This result also holds among firms making horizontal acquisitions, thereby indicating that performance feedback is an important consideration in corporate level strategic decision making.
