Corporate Alliances, Resource Reallocation, and the Propagation of Merger Activity

56 Pages Posted: 28 Feb 2008 Last revised: 27 Dec 2013

See all articles by Fernando Anjos

Fernando Anjos

NOVA School of Business and Economics

Haiwei Jing

University of Texas at Austin - Department of Finance

Date Written: October 14, 2013

Abstract

We model an economy of inter-firm alliances, and we show that such alliances are a channel for merger propagation. We confirm the model's main prediction in data, where the likelihood that a firm is involved in M&A increases significantly if its partners engaged in M&A in the past. We present three additional empirical results: (i) the propagation effect is stronger when we include proxies for the strength of post-partner-merger resource reallocation, as predicted by the model; (ii) merger propagation also depends on indirect alliance-network connections; (iii) partner mergers also lead to a higher likelihood of entering into new alliances.

Keywords: mergers, merger waves, alliances

JEL Classification: D2, G34

Suggested Citation

Anjos, Fernando and Jing, Haiwei, Corporate Alliances, Resource Reallocation, and the Propagation of Merger Activity (October 14, 2013). Available at SSRN: https://ssrn.com/abstract=1097727 or http://dx.doi.org/10.2139/ssrn.1097727

Fernando Anjos (Contact Author)

NOVA School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

HOME PAGE: http://sites.google.com/site/fernandoanjossite/

Haiwei Jing

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

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