Economic Shocks, Competition and Merger Activity

SMC Author

Kevin Okoeguale

SMC Affiliated Work

1

Status

Faculty

School

School of Economics and Business Administration

Department

Finance

Document Type

Paper

Publication Date

12-2013

Publication / Conference / Sponsorship

SSRN

Description/Abstract

This study seeks to understand “how” economic shocks drive industry merger activity. I test whether economic shocks from deregulation and technological change drive industry merger activity by increasing industry competition, controlling for the effect of valuations. I 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

DOI

10.2139/ssrn.2024317

Disciplines

Business | Economics

Comments

Unpublished manuscript.

Original Citation

Okoeguale, K. (2013, December). Economic Shocks, Competition and Merger Activity. Unpublished manuscript. doi: 10.2139/ssrn.2024317

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