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The Dynamics of Mergers and Acquisitions in Oligopolistic Industries

48 Pages Posted: 5 Mar 2008 Last revised: 15 Feb 2012

Jianjun Miao

Boston University - Department of Economics

Dirk Hackbarth

Boston University Questrom School of Business

Date Written: November 30, 2011

Abstract

This article embeds an oligopolistic industry structure in a real options framework in which synergy gains of horizontal mergers arise endogenously and vary stochastically over time. We find that (i) mergers are more likely in more concentrated industries; (ii) mergers are more likely in industries that are more exposed to industrywide shocks; (iii) returns to merger and rival firms arising from restructuring are higher in more concentrated industries; (iv) increased industry competition delays the timing of mergers; (v) in sufficiently concentrated industries, bidder competition induces a bid premium that declines with product market competition; and (vi) mergers are more likely and yield larger returns in industries with higher dispersion in firm size.

Keywords: anticompetitive effect, industry structure, real options, takeovers

JEL Classification: G13, G14, G31, G34

Suggested Citation

Miao, Jianjun and Hackbarth, Dirk, The Dynamics of Mergers and Acquisitions in Oligopolistic Industries (November 30, 2011). Journal of Economic Dynamics and Control, Forthcoming; EFA 2007 Ljubljana Meetings Paper. Available at SSRN: https://ssrn.com/abstract=968870 or http://dx.doi.org/10.2139/ssrn.968870

Jianjun Miao (Contact Author)

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-6675 (Phone)

HOME PAGE: http://people.bu.edu/miaoj

Dirk Hackbarth

Boston University Questrom School of Business ( email )

Department of Finance
595 Commonwealth Avenue
Boston, MA 02215
United States
(617) 358-4206 (Phone)
(617) 353-6667 (Fax)

HOME PAGE: http://people.bu.edu/dhackbar/

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