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On the Patterns and Wealth Effects of Vertical Mergers

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  • Joseph P. H. Fan

    (Chinese University of Hong Kong)

  • Vidhan K. Goyal

    (Hong Kong University of Science and Technology)

Abstract

We use industry commodity flows information to measure vertical relations in completed mergers from 1962 to 1996. Almost one-third of the mergers display vertical relatedness. Vertical merger activity is more intensive in the 1980s and 1990s and less so in the 1960s and the 1970s. Vertical mergers generate positive wealth effects that are significantly larger than those for diversifying mergers; the wealth effects in vertical mergers are comparable to those in pure horizontal mergers.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 79 (2006)
Issue (Month): 2 (March)
Pages: 877-902

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Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:2:p:877-902

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Web page: http://www.journals.uchicago.edu/JB/

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Cited by:
  1. Michele Pizzo, 2013. "Related party transactions under a contingency perspective," Journal of Management and Governance, Springer, Springer, vol. 17(2), pages 309-330, May.
  2. Martynova, Marina & Renneboog, Luc, 2008. "A century of corporate takeovers: What have we learned and where do we stand?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(10), pages 2148-2177, October.
  3. Nils Herger & Christos Kotsogiannis & Steve McCorriston, 2011. "International Taxation and FDI Strategies: Evidence From US Cross-Border Acquisitions," Discussion Papers, Exeter University, Department of Economics 1109, Exeter University, Department of Economics.
  4. Ekaterina Emm & Jayant Kale, 2006. "Efficiency Implications of Corporate Diversification: Evidence from Micro Data," Working Papers 06-26, Center for Economic Studies, U.S. Census Bureau.
  5. Ahern, Kenneth R., 2012. "Bargaining power and industry dependence in mergers," Journal of Financial Economics, Elsevier, Elsevier, vol. 103(3), pages 530-550.
  6. Uysal, Vahap B. & Kedia, Simi & Panchapagesan, Venkatesh, 2008. "Geography and acquirer returns," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 17(2), pages 256-275, April.
  7. Gerard Hoberg & Gordon M. Phillips, 2010. "Text-Based Network Industries and Endogenous Product Di fferentiation," NBER Working Papers 15991, National Bureau of Economic Research, Inc.
  8. Gopalan, Radhakrishnan & Nanda, Vikram & Seru, Amit, 2007. "Affiliated firms and financial support: Evidence from Indian business groups," Journal of Financial Economics, Elsevier, Elsevier, vol. 86(3), pages 759-795, December.
  9. Gerard Hoberg & Gordon M. Phillips, 2011. "Conglomerate Industry Choice and Product Di fferentiation," NBER Working Papers 17221, National Bureau of Economic Research, Inc.
  10. Aktas, Nihat & de Bodt, Eric & Roll, Richard, 2005. "Hubris, Learning, and M&A Decisions," University of California at Los Angeles, Anderson Graduate School of Management, Anderson Graduate School of Management, UCLA qt7j94111c, Anderson Graduate School of Management, UCLA.
  11. Joseph P.H. Fan & Jun Huang & Randall Morck & Bernard Yeung, 2009. "Vertical Integration, Institutional Determinants and Impact: Evidence from China," NBER Working Papers 14650, National Bureau of Economic Research, Inc.
  12. Garfinkel, Jon A. & Hankins, Kristine Watson, 2011. "The role of risk management in mergers and merger waves," Journal of Financial Economics, Elsevier, Elsevier, vol. 101(3), pages 515-532, September.
  13. Shams, Syed M.M. & Gunasekarage, Abeyratna & Colombage, Sisira R.N., 2013. "Does the organisational form of the target influence market reaction to acquisition announcements? Australian evidence," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 24(C), pages 89-108.

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