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
Date Written: March 7, 2007
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: Suggested Citation
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By Rainer Lenz