Economic Shocks, Competition and Merger Activity
School of Economics and Business Administration
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.
Mergers, Deregulation, Technological Change, Competition, Efficiency
SMC Affiliated Work
Business | Economics
Okoeguale, K. (2013, December). Economic Shocks, Competition and Merger Activity. Unpublished manuscript. doi: 10.2139/ssrn.2024317
Okoeguale, Kevin. Economic Shocks, Competition and Merger Activity (2013). 10.2139/ssrn.2024317 [paper]. https://digitalcommons.stmarys-ca.edu/school-economics-business-faculty-works/195