ECONOMIC SHOCKS, COMPETITION AND MERGER ACTIVITY
Received: 26 Aug 2019 / Published: 26 Aug 2019
Abstract
This study seeks to understand “how” economic shocks drive industry merger activity. We test whether economic shocks from deregulation and technological change drive industry merger activity by increasing industry competition, controlling for the effect of valuations. We find that these shocks drive merger activity through three channels related to industry competition; deregulation drives merger activity by increasing entry and cash flow volatility; technological change drives merger activity by increasing entry and inter-firm dispersion in the quality of production technology. These findings underscore the role of the competitive mechanism in how managers reallocate assets via mergers and support the view that the industry-level clustering of merger activity is an efficiency-driven restructuring response to increased competition.
Keywords: Mergers; Deregulation; Technological Change; Competition; Efficiency
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This is an open access article distributed under the Creative Commons Attribution
License which permits unrestricted use, distribution, and reproduction in any medium,
provided the original work is properly cited. (CC BY 4.0).
CITE
Krolikowski, M.W.; Okoeguale, K. ECONOMIC SHOCKS, COMPETITION AND MERGER ACTIVITY. JBAFP 2019, 1, 0.
Krolikowski MW, Okoeguale K. ECONOMIC SHOCKS, COMPETITION AND MERGER ACTIVITY. Journal of Business Accounting and Finance Perspectives. 2019; 1(1):0.
Krolikowski, Marcin W.; Okoeguale, Kevin. 2019. "ECONOMIC SHOCKS, COMPETITION AND MERGER ACTIVITY." JBAFP 1, no. 1: 0.
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