Aggregate Merger Activity: New Evidence on the Wave Hypothesis

Linn, Scott C.; Zhu, Zhen

doi:10.2307/1061043

Cited by 20 publications

(29 citation statements)

References 14 publications

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“…Our paper follows the majority of previous empirical studies, particularly Town (1992) and Linn and Zhu (1997), in using the number of transactions as the measure of historical merger activity. 9 Specifically, we investigate the following series: series, covering 1969:I-2003:IV.…”

Section: The Datamentioning

confidence: 99%

“…Second, merger series have been modeled by autoregressive processes capable of producing wave-like behavior (Shughart and Tollison, 1984;Clark et al, 1988;Chowdhury, 1993;Barkoulas et al, 2001). Third, and finally, merger series have been modeled by means of parameterswitching models where waves in activity are caused by discrete parameter switches (Town, 1992;Linn and Zhu, 1997).…”

Section: Introductionmentioning

confidence: 99%

“…Following Town (1992) and Linn and Zhu (1997), we employ a Markov regime switching model to describe the stochastic behavior of merger activity. We provide a thorough motivation for this approach, starting from Nelson's (1959, p. 126) observation that aggregate merger series are characterized by "large bursts of activity separated by lengthy intervals of very low activity," which we take to suggest the presence of two distinct unobserved states of merger activity, 'high' and 'low'.…”

Section: Introductionmentioning

confidence: 99%

“…By letting mean and variance of the autoregressive model be determined by realizations of the Markov process governing the evolution of the two states, waves are triggered by switches in the unobserved state. While this approach borrows from Town (1992) and Linn and Zhu (1997), we propose a slightly modified formal specification in which the autoregressive processes' inertia persists also across state switches, leading merger activity to react less abruptly to such switches. More importantly, we use new and consistent quarterly time series data covering merger activity both in the US and the UK, extending from 1973: IV through 2003:IV and from 1969:I through 2003 In this paper, we challenge the notion of the much-discussed 1980s merger wave in the US.…”

Section: Introductionmentioning

confidence: 99%

“…To address the central issue of wave identification, we conduct inference on the regime indicator within a Bayesian framework employing Gibbs sampling techniques (Gelfand and Smith, 1990;Albert and Chib, 1993). In contrast, the aforementioned studies by Town (1992) and Linn and Zhu (1997) base wave identification on Maximum Likelihood techniques (Hamilton, 1989(Hamilton, , 1993. In this latter approach, inference consists in first estimating the model's unknown parameters via Maximum Likelihood, and then conducting inference on the unobserved state conditional on the parameter estimates.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Are there waves in merger activity after all?

Gärtner

Halbheer

2009

International Journal of Industrial Organization

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This paper investigates the merger wave hypothesis for the US and the UK employing a Markov regime-switching model. Using quarterly data covering the last 30 years, for the US, we identify the beginning of a merger wave in the mid 1990s but not the much-discussed 1980s merger wave. We argue that the latter finding can be ascribed to the refined methods of inference offered by the Gibbs sampling approach. As opposed to the US, mergers in the UK exhibit multiple waves, with activity surging in the early 1970s and the late 1980s. AbstractThis paper investigates the merger wave hypothesis for the US and the UK employing a Markov regime switching model. Using quarterly data covering the last thirty years, for the US, we identify the beginning of a merger wave in the mid 1990s but not the much-discussed 1980s merger wave. We argue that the latter finding can be ascribed to the refined methods of inference offered by the Gibbs sampling approach. As opposed to the US, mergers in the UK exhibit multiple waves, with activity surging in the early 1970s and the late 1980s.

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Section: The Datamentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Are there waves in merger activity after all?

Gärtner

Halbheer

2009

International Journal of Industrial Organization

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The causes of mergers: tests based on the gains to acquiring firms' shareholders and the size of premia

Mueller

Sirower

2003

Manage Decis Econ

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Despite the large number of event studies of mergers that have been undertaken, considerable disagreement still exists over whether mergers increase the value of the merging firms, and if so why. Most event studies measure the average returns to the acquired and acquiring companies' shareholders separately, and based on these averages conclude either that mergers increase wealth, or that they reduce it. From this the authors go on to claim support either for a hypothesis about how mergers increase efficiency, or for one that claims they do not. This paper develops a methodology that uses the distribution of gains and losses across the two samples of firms, and their relationship to one another to test four hypotheses about why mergers occur: (1) the market-for-corporate-control hypothesis, (2) the synergy hypothesis, (3) the managerial discretion hypothesis, and (4) the hubris hypothesis. The hypotheses are tested with data for 168 mergers between large companies from 1978 through 1990. Considerable support is found for the managerial discretion and hubris hypotheses, and some support is found for the market-for-corporate-control hypothesis. Little or no support is found for the hypothesis that mergers create synergies and that shareholders of both the acquiring and acquired firms share gains from these synergies. Copyright © 2003 John Wiley & Sons, Ltd.

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Detecting of Merger Waves in China’s Capital Market

Guo

Xiao

2020

Ieis2019

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Aggregate Merger Activity: New Evidence on the Wave Hypothesis

Cited by 20 publications

References 14 publications

Are there waves in merger activity after all?

Are there waves in merger activity after all?

The causes of mergers: tests based on the gains to acquiring firms' shareholders and the size of premia

Detecting of Merger Waves in China’s Capital Market

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