The Promotional-Financial Dynamic of Merger Movements: A Historical Perspective

Creditor-Focused Corporate Governance: Evidence from Mergers and Acquisitions in Japan

“…Shleifer and Vishny (2003) propose a model of mergers where stock overvaluation encourages firms to acquire assets using their own stock as currency; if stock overvaluation and overall market peaks tend to coincide, their model provides a ready explanation for merger waves. Du Boff and Herman (1989) also conclude in favor of a strong link between market overvaluation and merger activity, although they do not examine the welfare implications for bidders formally, and ascribe rent-seeking motives for promoters of mergers. More traditionally, Mitchell and Mulherin (1996) argue that mergers result from shocks to an industry's economic, technological, or regulatory environment, and are an efficient way to allocate assets following such shocks.…”

Financial Instability: A Recession Simulation on the U.S. Corporate Structure

“…They also detected a negative impact on research and development expenditures. Du Boff and Herman [1989] found historical as well as current evidence to support their hypothesis that mergers produce not greater efficiency, but much greater fees for their promoters and financiers.…”

The Business Enterprise in the Age of Money Manager Capitalism

“…Mergers and acquisitions (and divestitures) became a lucrative business, especially for financial enterprises (Chandler 1990, 624), and more specifically for investment bankers, commercial bankers, pension/mutual fund trustees, money managers/brokers (Brown 1998;Du Boff and Herman 1989). The financialization of the going concern was inescapable.…”

“…Goodwill includes various factors -trade-marks, copyrights and patents, brand names, and reputation -"that give a differential [pecuniary] advantage to their owners, but they are of no aggregate advantage to the community … they make no part of the wealth of nations" ([1904] 1975, 139-140). That advantage is, in large part, derived from the increasing difference between the stock market value and the real asset value of a corporation, which first required the increasing divergence between industrial and business capital, and which later triggered significant changes in capitalism, such as concentration of ownership, corporatization, conglomeration, securitization, and financialization (see Du Boff and Herman 1989;Wray 2007).…”

“…The financialization of the going concern was inescapable. Financialization was, on one hand, business enterprises' strategic response to a changing economic environment -for example, cyclical downturns, decreasing profitability, and increasing competition -in the form of financial innovations, such as junk bonds, zero coupons, stock option futures, leveraged buyouts, money market accounts, interest rate swaps, and stock buybacks (Du Boff and Herman 1989;Lazonick 2012;Raines and Leathers 1992, 435-437). It was, on the other hand, assisted (and often driven by) the state's laissez-faire policies, such as, for example, the Employment Retirement Income Security Act (ERISA) of 1974, the Reagan-era tax cuts in early 1980s, permission of stock repurchases in 1982, and the privatization of social security capital in 2005.…”