FS IV 01 – 26 Why Mergers Reduce Profits and Raise Share Prices — A Theory of Preemptive Mergers
نویسندگان
چکیده
Why Mergers Reduce Profits and Raise Share Prices — A Theory of Preemptive Mergers* by Sven-Olof Fridolfsson and Johan Stennek We explain the empirical puzzle why mergers reduce profits and raise share prices. If being an “insider” is better than being an “outsider,” firms may merge to preempt their partner merging with a rival. The stock-value of the insiders is increased, since the risk of becoming an outsider is eliminated. We also explain why shareholders of targets gain while acquirers typically break even. These results are derived in an endogenousmerger model, predicting the conditions under which mergers occur, when they occur, and how the surplus is shared.
منابع مشابه
Why mergers reduce profits and raise share prices : A theory of preemptive mergers
Why Mergers Reduce Profits and Raise Share Prices — A Theory of Preemptive Mergers* by Sven-Olof Fridolfsson and Johan Stennek We explain the empirical puzzle why mergers reduce profits and raise share prices. If being an “insider” is better than being an “outsider,” firms may merge to preempt their partner merging with a rival. The stock-value of the insiders is increased, since the risk of be...
متن کاملFS IV 01 19 Bargaining , Mergers , and Technology Choice in Bilaterally Oligopolistic Industries
This paper provides a conceptual framework of multilateral bargaining in a bilaterally oligopolistic industry to analyze the motivations for horizontal mergers, technology choice, and their welfare implications. We first analyze the implication of market structure for the distribution of industry profits. We find that retailer mergers are more likely (less likely) if suppliers have increasing (...
متن کاملThe Effects of Mergers: An International Comparison
This paper analyzes the effects of mergers around the world over the past 15 years. We utilize a large panel of data on mergers to test several hypotheses about mergers. The effects of the mergers are examined by comparing the performance of the merging firms with control groups of nonmerging firms. The comparisons are made on profitability and sales. The results show that mergers on average do...
متن کاملFS IV 01 – 05 Profitable Horizontal Mergers without Cost Advantages : The Role of Internal Organization , Information , and Market Structure
Profitable Horizontal Mergers without Cost Advantages: The Role of Internal Organization, Information, and Market Structure by Steffen Huck, Kai A. Konrad and Wieland Müller Merged firms are typically rather complex organizations. Accordingly, merger has a more profound effect on the structure of a market than simply reducing the number of competitors. We show that this may render horizontal me...
متن کاملSwitching Costs and the Timing of Merger-Induced Price Changes
This paper formalizes a non-cooperative explanation for pre-merger price increases. When consumers face switching costs, firms have strong incentives to offer bargain prices to lock in consumers whom they can exploit in the future. A future merger reduces a firm’s incentive to gain current market share, however, because the firm anticipates sharing future profits. Focusing on near-term profit, ...
متن کامل