Market reactions to acquisition announcements: The importance of signaling ‘why’ and ‘where’

Acquisitions are risky events but not all acquisitions involve the same levels of risk. We suggest that announced acquisition motive – ‘why’ is an important risk signal. categorize motives and distinguish between with ‘pure explore’ exploit’ motives. Recognizing most have multiple motives, we identify ‘ambidextrous’ different combinations explorative exploitative too. Then, building on recent contributions to signaling theory, argue will matter more, if ‘where’ pertains a high-risk setting. measure this using target-to-acquirer industry relatedness. find market reacts more positively pure acquisitions, aimed at exploration or exploitation, compared ambidextrous acquisitions. show orientated towards exploitation than toward exploration. Finally, relatedness moderates relationship, in willing tolerate related industry. Our core contribution literatures ambidexterity. provide new insights into incidence specific ways which they mixed, market's reaction their announcement. In addition, contribute emerging literature takes behavioral perspective reactions by showing matter.