Poor performers persist longer than they would otherwise
In the long history of capital accumulation, American corporations have carved out a singular habit: they acquire, and then they acquire again, even when the evidence suggests they should not. A sweeping international study spanning nearly eight thousand firms and three decades of deals reveals that the United States alone sustains a culture of serial acquisition in which poor performance carries surprisingly little penalty. Whether this reflects the resilience of a sophisticated market or its capacity to absorb and conceal failure is a question the researchers leave deliberately open.
- Four in five U.S. mergers involve the same large repeat buyers—IBM, Google, Microsoft—creating a concentrated acquisition culture unlike anything seen in global markets.
- Even when deals disappoint and stock prices signal disapproval, the worst American acquirers earn only ~1% returns yet face no meaningful barrier to their next deal.
- Outside the U.S., poor acquirers are punished swiftly and denied second chances—the gap between top and bottom performers abroad is only a third as wide as in America.
- Researchers from Cornell, Rutgers, and the University of Minho argue that intangible assets like patents and IP make overpayment harder to detect, shielding underperformers from market discipline.
- Strong U.S. governance and disclosure systems, paradoxically, appear to give failing acquirers more room to persist rather than less—a 'crucible' that prolongs poor behavior.
- The study frames itself as an opening question rather than a verdict, calling on scholars to apply a global lens before concluding whether American serial acquisition is a strength or a structural blind spot.
American corporations have developed an appetite for acquisition that sets them apart from the rest of the world. Four out of every five U.S. mergers and acquisitions are orchestrated by the same large, publicly traded serial acquirers—companies like IBM, Google, and Microsoft that make a business of buying smaller rivals. What makes this pattern distinctly American is not just its prevalence, but its persistence: even when deals go badly, the biggest U.S. acquirers keep buying. Elsewhere, that tolerance does not exist.
Researchers at Cornell, Rutgers, and the University of Minho examined nearly eight thousand serial acquirers across the world, tracking more than thirty-three thousand deals over several decades. The best American acquirers saw stock prices jump roughly 3.5 percent after their first deal in any three-year window, sustaining returns above 3 percent for subsequent deals. The worst managed only about 1 percent across five years—yet they kept acquiring. Outside the United States, the gap between top and bottom performers was only about one-third as wide, and poor acquirers faced real consequences.
Andrew Karolyi, dean of the Cornell SC Johnson College of Business and senior author of the study, identified three overlapping explanations. U.S. firms hold a disproportionate concentration of intangible assets—patents, licensing rights, intellectual property—whose value is difficult for outsiders to assess, making overpayment easier to obscure. America's governance structures are also stronger and more transparent than most, which paradoxically creates space for underperformers to persist. "It's sort of a crucible that allows these poor performers to persist longer than they would otherwise," Karolyi observed.
The research began from a simple recognition: most merger-and-acquisition theory is built on American evidence, because that is where most capital-markets scholarship happens. When the team widened the lens globally, they found that non-U.S. markets punished failure more swiftly and severely—raising the question of whether the rest of the world was behaving oddly, or whether something unusual was happening in America. Karolyi frames the findings as an invitation rather than a conclusion, hoping the study will inspire others to pursue the global perspective needed to truly understand why American companies keep buying, even when the market tells them they should stop.
American corporations have developed a peculiar appetite for acquisition that sets them apart from the rest of the world. Four out of every five mergers and acquisitions in the United States are orchestrated by the same handful of large, publicly traded firms—serial acquirers, in the academic term—companies like IBM, Google, and Microsoft that make a business of buying up smaller rivals. What makes this pattern distinctly American is not just its prevalence, but its persistence. Even when these deals go badly, when the stock market signals disapproval on announcement day, the biggest U.S. acquirers keep buying. They get second chances, third chances, fourth chances. Elsewhere on the globe, that tolerance does not exist.
Researchers at Cornell, Rutgers, and the University of Minho set out to understand why. They examined nearly eight thousand serial acquirers across the world, tracking more than thirty-three thousand deals over several decades. What they found was a stark divergence. The best American acquirers—those that consistently generate positive returns—saw their stock price jump roughly 3.5 percent following their first acquisition in any three-year window, and maintained returns above 3 percent for each subsequent deal over the next five years. The worst American acquirers, by contrast, managed only about 1 percent in returns across that entire five-year span. Yet they kept acquiring. Outside the United States, the gap between top and bottom performers was only about one-third as wide. Poor acquirers abroad faced real consequences. They did not get to keep playing.
Andrew Karolyi, dean of the Cornell SC Johnson College of Business and senior author of the study published in Critical Finance Review, framed the question this way: what is special about American markets that allows underperforming serial acquirers to survive? The answer, he and his collaborators suggest, lies in three overlapping factors. First, the United States has a disproportionate concentration of firms whose assets are intangible rather than physical—patents, licensing rights, intellectual property. Tech companies especially fit this profile. Second, the American financial system's governance structures are stronger and more transparent than those in most other countries, which paradoxically creates space for poorly performing acquirers to persist. "Maybe it's because the system allows you to have poorly performing serial acquirers continue acquiring," Karolyi said. "It's sort of a crucible that allows these poor performers to persist longer than they would otherwise."
The research began with a simple observation: most merger-and-acquisition theory is built on American evidence, simply because so much capital-markets research happens in the United States. Scholars study what is in front of them. But when Karolyi and his team widened the lens globally, they found patterns that did not align with what theory predicted. Non-U.S. acquirers that performed poorly were not given repeated opportunities to prove themselves. The market punished failure more swiftly and more severely. This raised a question worth asking: was the rest of the world behaving oddly, or was something unusual about American markets?
The intangible-asset explanation carries particular weight. U.S. tech firms, laden with patents and intellectual property, represent attractive acquisition targets precisely because their value is not easily replicated or understood by outsiders. A company might overpay for a tech acquisition and still be perceived as having made a strategic move—the market may not immediately recognize the overpayment. In markets where assets are more tangible and easier to value, such mistakes are harder to hide. Governance strength matters too. Strong regulatory oversight and transparent disclosure requirements mean that even poorly performing acquirers face less pressure to stop than they might in less-developed markets. The system is robust enough to absorb their mistakes.
Karolyi sees this research as an opening, not a conclusion. The study raises more questions than it answers. Why exactly does the intangible-asset concentration in the U.S. tech sector enable this behavior? How much does governance structure actually matter? What other factors might explain the American exceptionalism in serial acquisition? "We hope this will inspire others to take this bigger, global lens," he said, "and then maybe we can come to a really better understanding of this unusual persistence by U.S. serial acquirers." For now, the pattern is clear: American companies keep buying, even when the market tells them they should stop. The question of why—and whether that is ultimately good or bad for shareholders—remains open.
Notable Quotes
The system allows poorly performing serial acquirers to continue acquiring—it's a crucible that lets poor performers persist longer than they would otherwise.— Andrew Karolyi, Cornell SC Johnson College of Business
U.S. firms are disproportionately laden with a larger fraction of their total assets being in intangible form. The U.S. tech industry is a poster child for large intangible asset bases.— Andrew Karolyi
The Hearth Conversation Another angle on the story
Why would a company keep acquiring if the market is telling it the deals aren't working?
Because the system allows it. In the U.S., strong governance and transparency mean there's less immediate pressure to stop. A poorly performing acquirer can absorb losses in ways that would force a company in another country to halt.
But shareholders should care about returns. Shouldn't they force the board to stop?
You'd think so. But here's the thing—many of these acquirers are buying tech companies with intangible assets. Patents, intellectual property, licensing rights. The true value is hard to measure immediately. The market might not penalize the deal as harshly as it would a bad real-estate acquisition.
So the market is fooled?
Not fooled exactly. More like the market can't see clearly enough to punish the behavior decisively. In other countries, where assets are more tangible and easier to value, a bad deal is a bad deal. The consequences are swift.
Is this a problem?
That's what researchers are still trying to figure out. The persistence could mean American companies are patient enough to build real value through acquisition. Or it could mean they're wasting capital on deals that never pay off. The governance system is strong enough to let both possibilities coexist.
And no one's stopping them?
Not yet. The market hasn't forced the issue. As long as these companies remain large and profitable overall, they can keep acquiring. The question is whether that's sustainable.