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The dynamics of mergers and acquisitions in oligopolistic industries

  • Jianjun Miao

    ()

    (Department of Economics, Boston University, CEMA, Central University of Finance and Economics, and AFR, Zhejiang University)

  • Dirk Hackbarth

    ()

    (Department of Finance,University of Illinois)

This paper embeds an oligopolistic industry structure in a real options framework in which synergy gains of horizontal mergers a rise endogenouslya nd vary stochastically over time. We find that(i) mergers are more likely in more concentrated industries; (ii) mergers are more likely inindustries that are more exposed to industry-wide shocks; (iii) returns to merger and rival firms arising from restructuring are higher in more concentrated industries;(iv) increased industry competition delays the timing of mergers; (v) insufficiently concentrated industries, bidder competition induces abid premium that declines with product market competition;and (vi) mergers are more likely and yield larger returns in industries with higher dispersion in firm size.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-029.

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Length: 25 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:bos:wpaper:wp2011-029
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