Mergers and acquisitions: An experimental analysis of synergies, externalities and dynamics

Rachel T.A. Croson, Armando Gomes, Kathleen L. McGinn, Markus Nöth

Research output: Contribution to journalReview articlepeer-review

21 Scopus citations

Abstract

Mergers and acquisitions improve market efficiency by capturing synergies between firms. But takeovers also impose externalities (both positive and negative) on the remaining firms in the industry. This paper describes a new equilibrium concept designed to explain and predict takeovers in this setting. We experimentally compare the new equilibrium concept to that of competing concepts in situations without and with externalities. Moreover, we examine the predicted dynamics of takeovers and outcome implications of those dynamics. Our experimental results support the predictions of the new equilibrium concept and provide implications for further empirical tests.

Original languageEnglish (US)
Pages (from-to)481-514
Number of pages34
JournalReview of Finance
Volume8
Issue number4
DOIs
StatePublished - Dec 1 2004
Externally publishedYes

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