The Impact of Mergers and Acquisitions on Top Income Shares

Niklas Uliczka

No 5, TUPD Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: Each successfully completed M&A transaction generates lucrative income opportunities to specific parties involved in deal-making due to compensation mechanisms linked to the transaction value. In theory, this transactional channel of M&A activity might relate to income inequality. The main objective of this study is to provide the first empirical analysis on the relationship between M&A and income shares at the very top of the income distribution. Using an unbalanced panel design with country-year observations from 46 countries allows exploiting cross-sectional along with temporal variation. Methodologically, the Driscoll and Kraay estimator is applied as it is heteroskedasticityconsistent and robust to nonparametric forms of serial and cross-sectional dependence. This study finds statistical evidence for a positive and non-linear association pattern between changes in M&A activity and changes in top income shares, indicating pro-rich effects. Additionally, periods of systematic banking crises significantly intensify the relationship between M&A activity and increasing income concentration.

Pages: 32 pages
Date: 2021-07
New Economics Papers: this item is included in nep-com and nep-cwa
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http://hdl.handle.net/10097/00132116

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Persistent link: https://EconPapers.repec.org/RePEc:toh:tupdaa:5

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