We investigate the upstream and downstream product-market effects of a large sample of horizontal mergers and acquisitions from 1980 to 1997. We construct a data set that identifies the corporate customers, suppliers, and rivals of the firms initiating horizontal mergers and use this data set to examine announcement-related stock market revaluations and post-merger changes in operating performance. We find little evidence consistent with increased monopolistic collusion. However, we do find evidence consistent with improved productive efficiency and buying power as sources of gains to horizontal mergers. The nature of the buying power gains, i.e., rents from monopsonistic collusion or improved purchasing efficiency, is also investigated.

We examine the form, adoption rates, and economic rationale for various mutual fund investment restrictions. A sample of U.S. domestic equity funds from 1994 to 2000 reveals systematic patterns in investment constraints, consistent with an optimal contracting equilibrium in the fund industry. Restrictions are more common when (i) boards contain a higher proportion of inside directors, (ii) the portfolio manager is more experienced, (iii) the fund is managed by a team rather than an individual, and (iv) the fund does not belong to a large organizational complex. Low- and high-constraint funds produce similar risk-adjusted returns, also consistent with an optimal contracting equilibrium.

This paper analyzes the determinants of partial ownership of the foreign affiliates of U.S. multinational firms and, in particular, the marked decline in the use of joint ventures over the last 20 years. The evidence indicates that whole ownership is most common when firms coordinate integrated production activities across different locations, transfer technology, and benefit from worldwide tax planning. Because operations and ownership levels are jointly determined, it is helpful to use the liberalization of ownership restrictions by host countries and the imposition of joint venture tax penalties in the U.S. Tax Reform Act of 1986 as instruments for ownership levels to identify these effects. Firms responded to these regulatory and tax changes by using wholly owned affiliates instead of joint ventures and expanding intrafirm trade and technology transfer. The implied complementarity of whole ownership and intrafirm trade suggests that the reduced costs of engaging in integrated global operations contributed substantially to the sharply declining propensity of American firms to organize their foreign operations as joint ventures over the last two decades. Estimates imply that as much as one-fifth to three-fifths of the decline in the use of joint ventures by multinational firms is attributable to the increased importance of intrafirm transactions. The forces of globalization appear to have diminished, rather than accelerated, the use of shared ownership.