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The Q-Theory of Mergers: International and Cross-Border Evidence

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  • Peter L. Rousseau

    (Vanderbilt University)

Abstract

The main implications of the Q-theory of mergers are tested for United States and seven continental European countries in both the domestic and cross-border cases. I find that European firms, much like those in the United States, tend to use mergers and acquisitions to make large increases in their capital stocks, that this choice is more sensitive to the acquirer's Tobin's Q than its direct investment, and that mergers raise the efficiency of target assets. Data from cross-border mergers between U.S. acquirers and European targets support the theory most emphatically

Suggested Citation

  • Peter L. Rousseau, 2006. "The Q-Theory of Mergers: International and Cross-Border Evidence," 2006 Meeting Papers 153, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:153
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    References listed on IDEAS

    as
    1. Servaes, Henri, 1991. "Tobin's Q and the Gains from Takeovers," Journal of Finance, American Finance Association, vol. 46(1), pages 409-419, March.
    2. Richard Harris & Donald S. Siegel & Mike Wright, 2005. "Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 148-153, February.
    3. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    4. Vojislav Maksimovic & Gordon Phillips, 2001. "The Market for Corporate Assets: Who Engages in Mergers and Asset Sales and Are There Efficiency Gains?," Journal of Finance, American Finance Association, vol. 56(6), pages 2019-2065, December.
    5. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-224, January.
    6. Robert H. McGuckin & Sang V. Nguyen, 1995. "On Productivity and Plant Ownership Change: New Evidence from the Longitudinal Research Database," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 257-276, Summer.
    7. Frank R. Lichtenberg & Donald Siegel, 1987. "Productivity and Changes in Ownership of Manufactoring Plants," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3, Specia), pages 643-684.
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    Cited by:

    1. Stefano CLO & Chiara F. DEL BO & Matteo FERRARIS & Massimo FLORIO & Daniela VANDONE & Carlo FIORIO, 2015. "Public Enterprises In The Market For Corporate Control: Recent Worldwide Evidence," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(4), pages 559-583, December.
    2. Stefano CLÒ & Chiara F. DEL BÒ & Matteo FERRARIS & Carlo FIORIO & Massimo FLORIO & Daniela VANDONE, 2014. "Publicization versus Privatization: Recent worldwide evidence," CIRIEC Working Papers 1403, CIRIEC - Université de Liège.

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    More about this item

    Keywords

    reallocation; Tobin's Q; European Union;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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