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Vertical Mergers and Firm-Specific Physical Capital: Three Case Studies and Some Evidence on Timing

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  • Weiss, Avi

Abstract

This paper shows that indirect evidence is often available to assist in understanding the timing of a vertical merger or divestiture. In particular, it is shown that in cases involving firm-specific capital, changes in the residual correlation (after removing market and industry effects) between the firms' stock returns are helpful in explaining the reason for and the timing of the merger/divestiture. The ramifications of this finding are immediate since anything that can pinpoint the reason for a merger, and, moreover, the reason for the timing of a merger, will make merger policy more efficient and productive. Copyright 1994 by Blackwell Publishing Ltd.

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  • Weiss, Avi, 1994. "Vertical Mergers and Firm-Specific Physical Capital: Three Case Studies and Some Evidence on Timing," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 395-417, December.
    • Handle: RePEc:bla:jindec:v:42:y:1994:i:4:p:395-417
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    Cited by:

    1. Versaevel, Bruno, 2002. "Co-ordination costs and vertical integration in production franchise networks: a common agency model," Research in Economics, Elsevier, vol. 56(2), pages 157-186, June.
    2. Davide Vannoni, 1999. "Empirical Studies of Vertical Integration: the Transaction Cost Orthodoxy," CERIS Working Paper 199903, CNR-IRCrES Research Institute on Sustainable Economic Growth - Torino (TO) ITALY - former Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY.
    3. Luigi Pascali, 2009. "Contract Incompleteness, Globalization and Vertical Structure: an Empirical Analysis," Boston College Working Papers in Economics 727, Boston College Department of Economics.

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