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Are Mergers Beneficial or Detrimental? Evidence from Advertising Agencies1

Author

Listed:
  • Julian Simon
  • Manouchehr Mokhtari
  • Daniel Simon

Abstract

We study 33 pairs of advertising agencies that merged between 1947 and 1985, comparing each merging pair against two controls: (a) a pair of agencies with combined merger-date billings close to the total billings of the merged unit, and (b) a single agency with similar total merger-date billings. Gross revenues are the dependent variable. Results: Merging firms do worse in the short run than controls. Assuming similar subsequent rates of growth for merging and non-merging firms, a loss of 16 percent of firm value due to merging is implied.

Suggested Citation

  • Julian Simon & Manouchehr Mokhtari & Daniel Simon, 1996. "Are Mergers Beneficial or Detrimental? Evidence from Advertising Agencies1," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 3(1), pages 69-82.
    • Handle: RePEc:taf:ijecbs:v:3:y:1996:i:1:p:69-82
    DOI: 10.1080/758533489
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    Citations

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    Cited by:

    1. Hans Schenk, 1996. "Bandwagon mergers, international competitiveness, and government policy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(3), pages 255-278, October.
    2. Claire E. Ashton-James & Killian J. McCarthy & Anca Dranca-Iacoban, 2011. "Power, and the Destruction of Value in Mergers and Acquisitions," Chapters, in: Killian J. McCarthy & Maya Fiolet & Wilfred Dolfsma (ed.), The Nature of the New Firm, chapter 1, Edward Elgar Publishing.
    3. Uppenberg, Kristian & Riess, Armin, 2004. "Determinants and growth effects of foreign direct investment," EIB Papers 3/2004, European Investment Bank, Economics Department.
    4. Y. Sekou Bermiss & Johann P. Murmann, 2015. "Who matters more? The impact of functional background and top executive mobility on firm survival," Strategic Management Journal, Wiley Blackwell, vol. 36(11), pages 1697-1716, November.

    More about this item

    Keywords

    mergers; advertising agencies JEL classification: L10;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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