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

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

doi:10.1007/s10679-004-6265-z

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 journal › Review article › peer-review

26 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 language	English (US)
Pages (from-to)	481-514
Number of pages	34
Journal	Review of Finance
Volume	8
Issue number	4
DOIs	https://doi.org/10.1007/s10679-004-6265-z
State	Published - Dec 1 2004
Externally published	Yes

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

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.",

author = "Croson, {Rachel T.A.} and Armando Gomes and McGinn, {Kathleen L.} and Markus N{\"o}th",

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T2 - An experimental analysis of synergies, externalities and dynamics

AU - Croson, Rachel T.A.

AU - Gomes, Armando

AU - McGinn, Kathleen L.

AU - Nöth, Markus

PY - 2004/12/1

Y1 - 2004/12/1

N2 - 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.

AB - 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.

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JO - Review of Finance

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

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