Mergers and Asset Prices in a Firm Network Economy
35 Pages Posted: 9 Mar 2008
There are 2 versions of this paper
Mergers and Asset Prices in a Firm Network Economy
Mergers and Asset Prices in a Firm Network Economy
Date Written: March 4, 2008
Abstract
We examine merger activity and its effect on asset pricing in a firm network economy. Mergers create internal capital markets which change the cash flow risk structure of the merging firms. We propose a solution concept for coalitional games without the superadditivity axiom, which extends the Shapley value, and apply it to the merging activity of firms in a network. The possibility of a merger increases the equity value of standalone firms. Higher network dependence generally increases merger activity but nevertheless causes lower firm equity values. Recession and expansion, as measured by the average debt/total assets ratio, generally decrease the number of coalitions in a network, generating a decreasing curve of merger activity.
Keywords: Mergers, coalitional games without the superadditivity axiom, asset pricing in coalitions, network dependence models, buyer-supplier networks
JEL Classification: G12, G34, C71, C78
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
New Evidence and Perspectives on Mergers
By Gregor Andrade, Mark L. Mitchell, ...
-
Do Managerial Objectives Drive Bad Acquisitions?
By Randall Morck, Andrei Shleifer, ...
-
Stock Market Driven Acquisitions
By Andrei Shleifer and Robert W. Vishny
-
Stock Market Driven Acquisitions
By Andrei Shleifer and Robert W. Vishny
-
Poison or Placebo? Evidence on the Deterrent and Wealth Effects of Modern Antitakeover Measures
By Robert Comment and G. William Schwert
-
Does Corporate Performance Improve after Mergers?
By Paul M. Healy, Krishna Palepu, ...
-
Managerial Performance, Tobin's Q, and the Gains from Successful Tender Offers
By Larry H.p. Lang, Ralph A. Walkling, ...