Geographic Variation in M&A Activity, Spillovers, and Valuation Shocks

69 Pages Posted: 3 Dec 2019

See all articles by Anjana Rajamani

Anjana Rajamani

Erasmus University Rotterdam (EUR)

Frederik P. Schlingemann

University of Pittsburgh - Finance Group; European Corporate Governance Institute (ECGI)

Date Written: November 15, 2019


We document large and persistent differences in the acquisitiveness of firms in the U.S. based on the location of their headquarters. We hypothesize and find evidence that local peer effects in M&A activity contribute to such persistence. Specifically, the acquisitiveness of non-dominant industry firms in an economic area (EA) relates positively to valuations and idiosyncratic return shocks of local dominant industry firms. Local spillover effects are stronger for firms headquartered in EAs with higher M&A activity and dominant industries in these EAs are subject to larger positive valuation shocks. Overall, our results suggest that firms perceive the valuations of their local peers as informative for their acquisition decisions. The market seems skeptical with respect to firms responding to local peer valuation shocks as we find an inverse relation between announcement returns and idiosyncratic returns shocks of their local dominant industry peers.

Keywords: mergers and acquisitions, geographic variation, local spill-overs, valuation shocks

JEL Classification: G34, R30, R1

Suggested Citation

Rajamani, Anjana and Schlingemann, Frederik Paul, Geographic Variation in M&A Activity, Spillovers, and Valuation Shocks (November 15, 2019). Available at SSRN: or

Anjana Rajamani

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA

Frederik Paul Schlingemann (Contact Author)

University of Pittsburgh - Finance Group ( email )

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European Corporate Governance Institute (ECGI) ( email )

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