Review of Finance Vol. 8 No. 4 2004

Mergers and Acquisitions: An Experimental Analysis of Synergies, Externalities and Dynamics

Rachel Croson¹; Armando Gomes¹; Kathleen L. McGinn²; Markus Nöth³

¹ The Wharton School, University of Pennsylvania · ² Graduate School of Business Administration, Harvard University · ³ Universität Mannheim

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.

DOI

10.1093/rof/8.4.481

Volume

8

Issue

4

Pages

481-514

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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