Acquisitions and Investment
AbstractWe derive a simple theoretical framework in which acquisitions are treated as an alternative way of obtaining capital goods. Our framework predicts that both investment and acquisitions are positively related to a firm's shadow value of capital. We transform our theoretical specification into an econometric model, which we then estimate using a long panel data-set spanning 503 US firms over 15 consecutive years. Our results indicate that an increase in the shadow value of capital has approximately the same proportionate effect on the level of acquisitions as it does on investment. This result proves to be robust to a variety of alternative specifications. Copyright 2002 by The London School of Economics and Political Science
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Bibliographic InfoPaper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 94-01.
Length: 27 pages
Date of creation: Jan 1994
Date of revision: Aug 2002
Publication status: Published: – revised version in Economica, New Series, Vol. 69, No. 275 (August 2002), pp. 391–414
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- Gugler, Klaus & Mueller, Dennis C. & Weichselbaumer, Michael, 2012. "The determinants of merger waves: An international perspective," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 1-15.
- Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu, 2005.
"The determinants of merger waves,"
05-15, Utrecht School of Economics.
- Shutao Cao, 2008. "A Model of Costly Capital Reallocation and Aggregate Productivity," Working Papers 08-38, Bank of Canada.
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