Aggregate merger activity and the business cycle
Date
2008
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
ORCID
Type
Degree Level
Masters
Abstract
This study examines macroeconomic and industry-level factors (with particular emphasis on the business cycle) on industry-level merger activity. In a sample of US mergers from 1979 to 2006, we find that industry level mergers are highly pro-cyclical. The business cycle has a positive and significant impact on both horizontal and non-horizontal mergers, even after controlling for other macroeconomic and industry-level effects. Although macroeconomic variables have similar effects on both horizontal and non-horizontal mergers, industry-level factors vary significantly between the two types of mergers. Horizontal mergers are much more aligned with neo-classical theories, while non-horizontal mergers are more affected by financing constraints and overvaluation. We also find that the determinants and financing preferences of industry-level mergers vary greatly across the business cycle stages, which suggests that the motivation for mergers changes in different economic conditions.
Description
Keywords
business cycle, merger waves, acquisitions, mergers
Citation
Degree
Master of Science (M.Sc.)
Department
Finance and Management Science
Program
Finance and Management Science