The Dynamics of Mergers and Acquisitions in Oligopolistic Industries
Boston University - Department of Economics
Boston University Questrom School of Business
November 30, 2011
Journal of Economic Dynamics and Control, Forthcoming
EFA 2007 Ljubljana Meetings Paper
This article embeds an oligopolistic industry structure in a real options framework in which synergy gains of horizontal mergers arise endogenously and vary stochastically over time. We find that (i) mergers are more likely in more concentrated industries; (ii) mergers are more likely in industries that are more exposed to industrywide 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) in sufficiently concentrated industries, bidder competition induces a bid 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.
Number of Pages in PDF File: 48
Keywords: anticompetitive effect, industry structure, real options, takeovers
JEL Classification: G13, G14, G31, G34
Date posted: March 5, 2008 ; Last revised: February 15, 2012
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