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Are There Waves in Merger Activity After All?

  • Dennis Gaertner


    (Socioeconomic Institute, University of Zurich)

  • Daniel Halbheer


    (Socioeconomic Institute, University of Zurich)

This paper investigates the merger wave hypothesis for the US and the UK employing a Markov regime switching model. Using quarterly data covering the last thirty years, for the US, we identify the beginning of a merger wave in the mid 1990s but not the much-discussed 1980s merger wave. We argue that the latter finding can be ascribed to the refined methods of inference offered by the Gibbs sampling approach. As opposed to the US, mergers in the UK exhibit multiple waves, with activity surging in the early 1970s and the late 1980s.

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Paper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 0414.

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Length: 32 pages
Date of creation: Sep 2004
Date of revision: Feb 2006
Publication status: published in International Journal of Industrial Organization 27(6), 2009, pp. 708–718.
Handle: RePEc:soz:wpaper:0414
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  14. Devra L. Golbe & Lawrence J. White, 1988. "A Time-Series Analysis of Mergers and Acquisitions in the U.S. Economy," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 265-310 National Bureau of Economic Research, Inc.
  15. Larry D. Qiu & Wen Zhou, 2007. "Merger waves: a model of endogenous mergers," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 214-226, 03.
  16. Dennis Gaertner & Daniel Halbheer, 2004. "Are There Waves in Merger Activity After All?," SOI - Working Papers 0414, Socioeconomic Institute - University of Zurich, revised Feb 2006.
  17. Mulherin, J. Harold & Boone, Audra L., 2000. "Comparing acquisitions and divestitures," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 117-139, July.
  18. David J. Ravenscraft, 1987. "The 1980s merger wave: an industrial organization perspective," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 31, pages 17-51.
  19. Nelson, Charles R & Piger, Jeremy & Zivot, Eric, 2001. "Markov Regime Switching and Unit-Root Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 404-15, October.
  20. Samuel Muehlemann & Juerg Schweri & Rainer Winkelmann & Stefan C. Wolter, 2005. "A Structural Model of Demand for Apprentices," CESifo Working Paper Series 1417, CESifo Group Munich.
  21. Philippe Mahler & Rainer Winkelmann, 2005. "Single Motherhood and (Un)Equal EducationalOpportunities: Evidence for Germany," SOI - Working Papers 0512, Socioeconomic Institute - University of Zurich.
  22. Stefan Boes & Markus Lipp & Rainer Winkelmann, 2005. "Money Illusion Under Test," SOI - Working Papers 0514, Socioeconomic Institute - University of Zurich.
  23. Yves Schneider & Peter Zweifel, 2005. "Spatial Effects in Willingness-to-Pay: The Case of Two Nuclear Risks," SOI - Working Papers 0502, Socioeconomic Institute - University of Zurich, revised Sep 2007.
  24. Boyan Jovanovic & Peter L. Rousseau, 2008. "Mergers as Reallocation," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 765-776, November.
  25. Resende, Marcelo, 1999. " Wave Behaviour of Mergers and Acquisitions in the UK: A Sectoral Study," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(1), pages 85-94, February.
  26. Chow, Gregory C., 1984. "Random and changing coefficient models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 21, pages 1213-1245 Elsevier.
  27. Golbe, Devra L & White, Lawrence J, 1993. "Catch a Wave: The Time Series Behavior of Mergers," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 493-99, August.
  28. Avenel, Eric, 2003. "Strategic vertical integration without foreclosure," Royal Economic Society Annual Conference 2003 11, Royal Economic Society.
  29. Bengt Holmstrom & Steven N. Kaplan, 2001. "Corporate Governance and Merger Activity in the United States: Making Sense of the 1980s and 1990s," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 121-144, Spring.
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