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The dynamics of mergers and acquisitions in oligopolistic industries

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  • Jianjun Miao

    ()
    (Department of Economics, Boston University, CEMA, Central University of Finance and Economics, and AFR, Zhejiang University)

  • Dirk Hackbarth

    ()
    (Department of Finance,University of Illinois)

Abstract

This paper embeds an oligopolistic industry structure in a real options framework in which synergy gains of horizontal mergers a rise endogenouslya nd vary stochastically over time. We find that(i) mergers are more likely in more concentrated industries; (ii) mergers are more likely inindustries that are more exposed to industry-wide shocks; (iii) returns to merger and rival firms arising from restructuring are higher in more concentrated industries;(iv) increased industry competition delays the timing of mergers; (v) insufficiently concentrated industries, bidder competition induces abid premium that declines with product market competition;and (vi) mergers are more likely and yield larger returns in industries with higher dispersion in firm size.

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Bibliographic Info

Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-029.

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Length: 25 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:bos:wpaper:wp2011-029

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Keywords: Anticompetitive effect; Industry structure; Real options; Takeovers;

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References

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Citations

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Cited by:
  1. Almeida, Heitor & Campello, Murillo & Hackbarth, Dirk, 2011. "Liquidity mergers," Journal of Financial Economics, Elsevier, vol. 102(3), pages 526-558.
  2. Muendler, Marc-Andreas, 2014. "Export or Merge? Proximity vs. Concentration in Product Space," CAGE Online Working Paper Series 180, Competitive Advantage in the Global Economy (CAGE).
  3. García-Feijóo, Luis & Madura, Jeff & Ngo, Thanh, 2012. "Impact of industry characteristics on the method of payment in mergers," Journal of Economics and Business, Elsevier, vol. 64(4), pages 261-274.
  4. Strebulaev, Ilya A. & Whited, Toni M., 2012. "Dynamic Models and Structural Estimation in Corporate Finance," Foundations and Trends(R) in Finance, now publishers, vol. 6(1–2), pages 1-163, November.
  5. Habib, Michel A. & Mella-Barral, Pierre, 2013. "Skills, core capabilities, and the choice between merging, allying, and trading assets," Journal of Mathematical Economics, Elsevier, vol. 49(1), pages 31-48.
  6. Lukas, Elmar & Welling, Andreas, 2014. "On the investment–uncertainty relationship: A game theoretic real option approach," Finance Research Letters, Elsevier, vol. 11(1), pages 25-35.
  7. Andrey Malenko & Alexander Gorbenko, 2013. "Means of payment and timing of mergers and acquisitions in a dynamic economy," 2013 Meeting Papers 928, Society for Economic Dynamics.
  8. repec:cge:warwcg:179 is not listed on IDEAS

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