Why do mergers cluster in time, causing merger waves?
|
Show Recommended textbook solutionsIntermediate Accounting14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield 1,471 solutions
 Fundamentals of Financial Management, Concise Edition10th EditionEugene F. Brigham, Joel Houston 777 solutions
Financial Accounting4th EditionDon Herrmann, J. David Spiceland, Wayne Thomas 1,097 solutions College Accounting20th EditionJames A Heintz, Robert W Parry 775 solutions Posted: 11 Nov 2004 Jarrad HarfordUniversity of Washington; European Corporate Governance Institute (ECGI) AbstractAggregate merger waves could be due to market timing or to clustering of industry shocks for which mergers facilitate change to the new environment. This study finds that economic, regulatory or technological shocks drive industry merger waves. However, the degree of capital liquidity determines whether a shock initiates a merger wave. This macro-level liquidity component causes industry merger waves to cluster in time even if industry shocks do not. Market-timing variables have little explanatory power relative to an economic model including this liquidity component. The contemporaneous peak in divisional acquisitions for cash also suggests an economic motivation for the merger activity. Keywords: Mergers and acquisitions, takeover, merger waves, behavioral, capital liquidity JEL Classification: G34 Suggested Citation: Suggested Citation Do you have a job opening that you would like to promote on SSRN?Paper statisticsFeedback to SSRN If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday. This is a preview. Log in to get access Abstract We represent the economy as a network of industries connected through customer and supplier trade flows. Using this network topology, we find that stronger product market connections lead to a greater incidence of cross-industry mergers. Furthermore, mergers propagate in waves across the network through customer-supplier links. Merger activity transmits to close industries quickly and to distant industries with a delay. Finally, economy-wide merger waves are driven by merger activity in industries that are centrally located in the product market network. Overall, we show that the network of real economic transactions helps to explain the formation and propagation of merger waves. Journal Information The Journal of Finance publishes leading research across all the major fields of financial research. It is the most widely cited academic journal on finance and one of the most widely cited journals in economics as well. Each issue of the journal reaches over 8,000 academics, finance professionals, libraries, government and financial institutions around the world. Published six times a year, the journal is the official publication of the American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics. JSTOR provides a digital archive of the print version of The Journal of Finance. The electronic version of the The Journal of Finance is available at http://www.interscience.wiley.com/. Authorized users may be able to access the full text articles at this site. Publisher Information Wiley is a global provider of content and content-enabled workflow solutions in areas of scientific, technical, medical, and scholarly research; professional development; and education. Our core businesses produce scientific, technical, medical, and scholarly journals, reference works, books, database services, and advertising; professional books, subscription products, certification and training services and online applications; and education content and services including integrated online teaching and learning resources for undergraduate and graduate students and lifelong learners. Founded in 1807, John Wiley & Sons, Inc. has been a valued source of information and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Wiley has published the works of more than 450 Nobel laureates in all categories: Literature, Economics, Physiology or Medicine, Physics, Chemistry, and Peace. Wiley has partnerships with many of the world’s leading societies and publishes over 1,500 peer-reviewed journals and 1,500+ new books annually in print and online, as well as databases, major reference works and laboratory protocols in STMS subjects. With a growing open access offering, Wiley is committed to the widest possible dissemination of and access to the content we publish and supports all sustainable models of access. Our online platform, Wiley Online Library (wileyonlinelibrary.com) is one of the world’s most extensive multidisciplinary collections of online resources, covering life, health, social and physical sciences, and humanities. Rights & Usage This item is part of a JSTOR
Collection. What were the causes of merger waves?The three most common drivers of merger waves are positive stock market conditions, technological change and overcapacity.
What are the reasons why merger happens between two companies?Companies merge to expand their market share, diversify products, reduce risk and competition, and increase profits. Common types of company mergers include conglomerates, horizontal mergers, vertical mergers, market extensions and product extensions.
What is M&A wave?Overview of M&A Waves. A merger wave is an intense period of merger activity in a particular sector or industry and last from a short period to a long time partly depending on the performance of the market and the participating companies.
What factors that affect mergers?Pre-transaction success factors. The right partner.. Trust between the parties.. Due diligence en good valuation.. Experience from previous mergers and acquisitions.. Communication before the execution of the merger or acquisition.. Quality of the plan.. Execution of the plan.. Swiftness of integration.. |
