Trade Relationships, Indirect Economic Links, and Mergers

73 Pages Posted: 18 Nov 2012 Last revised: 17 May 2017

See all articles by Jarrad Harford

Jarrad Harford

University of Washington

Robert J. Schonlau

Miami University - Farmer School of Business

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/

Robert J. Schonlau

Miami University - Farmer School of Business ( email )

Oxford, OH 45056
United States

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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