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The determinants of merger waves: An international perspective

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  • Gugler, Klaus
  • Mueller, Dennis C.
  • Weichselbaumer, Michael

Abstract

One of the most conspicuous features of mergers is that they come in waves that are correlated with increases in share prices and price/earnings ratios. We use a natural way to discriminate between pure stock market influences on firm decisions and other influences by examining merger patterns for both listed and unlisted firms. If “real” changes in the economy drive merger waves, as some neoclassical theories of mergers predict, both listed and unlisted firms should experience waves. We find significant differences between listed and unlisted firms as predicted by behavioral theories of merger waves.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:indorg:v:30:y:2012:i:1:p:1-15
    DOI: 10.1016/j.ijindorg.2011.04.006
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    1. Rao-Nicholson, Rekha & Salaber, Julie & Cao, Tuan Hiep, 2016. "Long-term performance of mergers and acquisitions in ASEAN countries," Research in International Business and Finance, Elsevier, vol. 36(C), pages 373-387.
    2. Tomaso Duso & Klaus Gugler & Florian Szücs, 2013. "An Empirical Assessment of the 2004 EU Merger Policy Reform," Economic Journal, Royal Economic Society, vol. 123(11), pages 596-619, November.
    3. Caiazza, Stefano & Pozzolo, Alberto Franco, 2016. "The determinants of failed takeovers in the banking sector: Deal or country characteristics?," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 92-103.
    4. Chak Hung J. Cheng & Michael K. Salemi, 2009. "Feast and Famine: Explaining Big Swings in the Hong Kong Economy between 1981 and 2007," Working Papers 372009, Hong Kong Institute for Monetary Research.
    5. Reddy, Kotapati Srinivasa, 2015. "Extant Reviews on Entry-mode/Internationalization, Mergers & Acquisitions, and Diversification: Understanding Theories and Establishing Interdisciplinary Research," MPRA Paper 63744, University Library of Munich, Germany, revised 2015.
    6. Lina M. Cortés & Iván A. Durán & Sandra Gaitán & Mateo Vasco, 2017. "Mergers and Acquisitions in Latin America: Industrial Productivity and Corporate Governance," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(10), pages 2179-2198, October.
    7. Spyros Arvanitis & Tobias Stucki, 2014. "How Swiss small and medium-sized firms assess the performance impact of mergers and acquisitions," Small Business Economics, Springer, vol. 42(2), pages 339-360, February.
    8. Rabin Hattari & Ramkishen S. Rajan, 2009. "Cross-border Mergers and Acquisitions (M&As) in Developing Asia: The Role of Financial Variables," Working Papers 362009, Hong Kong Institute for Monetary Research.
    9. Jimmy A. Saravia, 2013. "Merger waves and the Austrian business cycle theory," DOCUMENTOS DE TRABAJO CIEF 010929, UNIVERSIDAD EAFIT.
    10. Lina M. Cortés & John J. García & David Agudelo, 2015. "Effects of Mergers and Acquisitions on Shareholder Wealth: Event Study for Latin American Airlines," DOCUMENTOS DE TRABAJO CIEF 012453, UNIVERSIDAD EAFIT.
    11. Reddy, Kotapati Srinivasa, 2015. "Determinants of Cross-border Mergers and Acquisitions: A Comprehensive Review and Future Direction," MPRA Paper 63969, University Library of Munich, Germany, revised 2015.
    12. Boateng, Agyenim & Hua, Xiuping & Uddin, Moshfique & Du, Min, 2014. "Home country macroeconomic factors on outward cross-border mergers and acquisitions: Evidence from the UK," Research in International Business and Finance, Elsevier, vol. 30(C), pages 202-216.
    13. Fomin, M., 2016. "Business cycles and acquisition policy: Analysis of M&A deals of metallurgical companies," Working Papers 6441, Graduate School of Management, St. Petersburg State University.
    14. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.

    More about this item

    Keywords

    Merger waves; Listed versus unlisted firms; Managerial discretion; Overvaluation;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • G3 - Financial Economics - - Corporate Finance and Governance

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