Mergers and Acquisitions Waves in the U.K.: a Markov-Switching Approach

Marcelo Resende

No ECO2005/04, Economics Working Papers from European University Institute

Abstract: This paper further investigated wave behaviours for mergers and acquisitions-M&A in the U.K. during the 1969Q1/2004Q1 period by means of Markov-Switching models. Previous analysis had focused on traditional models that incorporate the potentially limiting assumption of constant transition probabilities across regimes. The consideration of more general models with time-varying transition probabilities across regimes along the lines of Diebold et al (1994) provide a useful route for assessing to which extent M&A waves are driven by economic variables usually considered in the related literature. The empirical implementation considered lagged conditioning variables referring to real output growth, real growth in money supply and real stock market returns. The evidence indicated that one should reject the constant transition probability model in favour of the time-varying transition probability model and therefore the usual aggregate variables considered in the empirical literature on M&A appear indeed to play some role in determining the wave behaviour of M&A in the U.K., though the effects are asymmetric across the different regimes.

JEL-codes: C32 L12 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-com, nep-ets, nep-fmk and nep-ind
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Journal Article: Mergers and acquisitions waves in the UK: a Markov-switching approach (2008)
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