The impact of the macroeconomic environment on merger activity: evidence from US time-series data
This article investigates the dynamic impact of the macroeconomic environment on aggregate merger activity in the US economy obtained from firm-level data during the period from January 1980 to December 2004. Applying time-series econometric tools to US Mergers and Acquisitions (M&A) data, we find: First, there is a long-run equilibrium relationship between the set of macroeconomic variables and four alternative measures of merger activity, implying that the macroeconomic factors plays an important role in determining the trend of aggregate merger activity in the US economy. Second, the most important macroeconomic variables in determining M&A volume include real income for the frequency-based measure of US merger activity, and stock market conditions and monetary policy for transaction value based measures of aggregate mergers. The ascending phase of business cycle provides the most favourable environment for more mergers for all four measures of merger activity. Our subsample period study provides evidence that 'corporate net cash flow' plays a significant role after 1998, which is consistent with the free-cash-flow hypothesis. Third, there are short run adjustment processes to the long-run equilibrium path in US merger activity. The main processes of impulse-response dynamics seem to finish within the 5-6 quarter period. We also discuss policy implications and directions for future extension.
Volume (Year): 21 (2011)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:21:y:2011:i:4:p:233-249. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.