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M&As: The Good, the Bad, and the Ugly

Journal of Applied Finance, 2007, vol. 17(1): pp. 5-20.

39 Pages Posted: 16 Jun 2012  

Kenneth R. Ahern

University of Southern California - Marshall School of Business; National Bureau of Economic Research (NBER)

J. Fred Weston

University of California, Los Angeles (UCLA) - Finance Area

Date Written: March 7, 2007

Abstract

M&As should be defined to include joint ventures, alliances, and divestitures in addition to mergers and acquisitions. M&As represent a neoclassical theory of how firms seek to enhance their capabilities and resources (the good). Good M&As are positive net present value external investments. Competing explanations of M&A activities include redistribution theories (the Bad) and nehavioral theories (the Ugly). Using our broad definition of M&As we analuze prior literature and present a case study of the defense industry. We find that the neoclassical theory has more explanatory power than the other two competing explanations under our broad definition of M&As.

Keywords: Mergers, neoclassical, behavioral

JEL Classification: G33, G34

Suggested Citation

Ahern, Kenneth R. and Weston, J. Fred, M&As: The Good, the Bad, and the Ugly (March 7, 2007). Journal of Applied Finance, 2007, vol. 17(1): pp. 5-20.. Available at SSRN: https://ssrn.com/abstract=2085006

Kenneth Ahern (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~kahern/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

J. Weston

University of California, Los Angeles (UCLA) - Finance Area ( email )

UCLA-AGSM
258 Tavistock Ave.
Los Angeles, CA 90049-3229
United States
310-472-5110 (Phone)
310-472-9471 (Fax)

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