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The dynamics of mergers and acquisitions in oligopolistic industries

Author

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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.

Suggested Citation

  • Jianjun Miao & Dirk Hackbarth, 2011. "The dynamics of mergers and acquisitions in oligopolistic industries," Boston University - Department of Economics - Working Papers Series WP2011-029, Boston University - Department of Economics.
  • Handle: RePEc:bos:wpaper:wp2011-029
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    More about this item

    Keywords

    Anticompetitive effect; Industry structure; Real options; Takeovers;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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