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Endogenous Merger Waves in Vertically Related Industries

25 Pages Posted: 24 Nov 2011 Last revised: 30 Nov 2011

Zhiyong Yao

Fudan University - School of Management

Wen Zhou

The University of Hong Kong - School of Business

Date Written: October 1, 2011

Abstract

We study merger waves in vertically related industries where firms can engage in both vertical and horizontal mergers. Even though any individual merger would have been profitable, firms may refrain from merging for fear of negative impacts from other mergers. When they do merge, however, they always merge in waves, which is either vertical or horizontal depending on the relative intensity of double markup and horizontal competitions in the two industries. Finally, merger waves may happen with or without any fundamental change in the underlying economic conditions.

Keywords: merger wave, horizontal mergers, vertical mergers, stable market structure

JEL Classification: L13, L42, D43

Suggested Citation

Yao, Zhiyong and Zhou, Wen, Endogenous Merger Waves in Vertically Related Industries (October 1, 2011). NET Institute Working Paper No. 11-34. Available at SSRN: https://ssrn.com/abstract=1958093 or http://dx.doi.org/10.2139/ssrn.1958093

Zhiyong Yao

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

Wen Zhou (Contact Author)

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China

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