Trade Relationships, Indirect Economic Links, and Mergers

73 Pages Posted: 18 Nov 2012 Last revised: 3 Dec 2019

See all articles by Jarrad Harford

Jarrad Harford

University of Washington; European Corporate Governance Institute (ECGI)

Robert J. Schonlau

Colorado State University, Fort Collins - Department of Finance & Real Estate

Jared R. Stanfield

University of Oklahoma; Financial Research Network (FIRN)

Date Written: May 16, 2017

Abstract

The economic links between firms created by customer and supplier relationships are critical determinants of those firms’ values and actions. We demonstrate that significant trade relationships and indirect economic links incrementally explain which firms are more likely to be involved in acquisitions, which pairs of firms are more likely to merge, and which mergers will have the greatest impact, both on value and in motivating follow-on mergers by rivals. Firms with major trade relationships are significantly less likely to acquire, or be acquired, by firms that do not share in those relationships.

Keywords: Mergers & Acquisitions, Product Market, Horizontal, Vertical, Supply Chain, Rivals

JEL Classification: G34, G30, L22

Suggested Citation

Harford, Jarrad and Schonlau, Robert J. and Stanfield, Jared R., Trade Relationships, Indirect Economic Links, and Mergers (May 16, 2017). 26th Australasian Finance and Banking Conference 2013, Available at SSRN: https://ssrn.com/abstract=2177692 or http://dx.doi.org/10.2139/ssrn.2177692

Jarrad Harford

University of Washington ( email )

Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)

HOME PAGE: http://faculty.washington.edu/jarrad/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Robert J. Schonlau

Colorado State University, Fort Collins - Department of Finance & Real Estate ( email )

Fort Collins, CO 80523
United States
9704916280 (Phone)
80523 (Fax)

Jared R. Stanfield (Contact Author)

University of Oklahoma ( email )

Norman, OK 73019
United States

HOME PAGE: http://jaredstanfield.com

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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