Industry Merger Intensity and Cost of Capital

22 Pages Posted: 6 Dec 2012

See all articles by Dev R. Mishra

Dev R. Mishra

University of Saskatchewan - Edwards School of Business

Date Written: December 2012

Abstract

Using a panel of industry‐average implied cost of equity capital and the value of prior year aggregate industry mergers, we find strong evidence that the industry cost of equity capital is negatively associated with industry merger activity. Our evidence is consistent with greater media coverage, analyst following, or increase in investor attention associated with industry merger activity lowering the required return on equity for firms in an industry that is not involved in merger activity via the ‘information risk’ or ‘incomplete information’ channels.

Suggested Citation

Mishra, Dev R., Industry Merger Intensity and Cost of Capital (December 2012). International Review of Finance, Vol. 12, Issue 4, pp. 469-490, 2012, Available at SSRN: https://ssrn.com/abstract=2185802 or http://dx.doi.org/10.1111/j.1468-2443.2012.01157.x

Dev R. Mishra (Contact Author)

University of Saskatchewan - Edwards School of Business ( email )

Edwards School of Business
Saskatoon, Saskatchewan S7N 5A7
Canada
306-966-8457 (Phone)
306-966-2515 (Fax)

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