Abstract
This paper uses the NPV approach to merger decisions to select variables which are expected to explain changes in the aggregate number of mergers of US manufacturing and mining firms over time. We test for and estimate a cointegrating relationship between such variables. We find that in the long run the number of mergers and acquisitions is positively related both to the level of manufacturing production and to the level of the nominal bond yield. A short run dynamic model is also presented. Annual changes in merger and acquisition activity were found to be positively related to current changes in Tobin's Q and changes in Q lagged one, two and four years; positively related to changes in the current bond yield but negatively related to changes in the yield in the previous year; and finally that changes in merger activity were related to the degree to which the number of mergers differed from the long run or equilibrium value in the previous year.
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Much of this work was carried out whilst I was a Visiting Scholar at The McIntire School of Commerce, University of Virginia, during the Spring of 1994. I would like to thank The McIntire School for providing such a stimulating environment and in particular I would like to thank Larry Pettit, George Overstreet, Bob Webb, Mark White, Bob Kemp and an anonymous referee for helpful suggestions. I alone am responsible for all errors and omissions. I would like to thank The Carnegie Trust for The Universities of Scotland for funding this research.
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Crook, J. Short and long run movements in U.S. merger activity. Review of Industrial Organization 11, 307–323 (1996). https://doi.org/10.1007/BF00414401
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DOI: https://doi.org/10.1007/BF00414401