The impact of macroeconomic activity and yield valuation on mergers and acquisitions in Europe
Fabio E.G. Röhrer,
Christian R. Proano and
Lebogang Mateane
No 185, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group
Abstract:
We examine the macroeconomic determinants of mergers and acquisitions (M&A) using panel data over 2006:Q1 - 2022:Q2 for 21 European Union (EU) countries. Across di§erent model specifications we find that bond yields and past real GDP growth are robust quantitatively and statistically significant determinants of M&A even after controlling for inflation and short-term global financial uncertainty. Additionally, we investigate the effect of the earnings before interest, taxes, depreciation and amortization multiple as an additional explanatory variable. A crucial novelty of our study is that bond yields reduce M&A activity because other investors are shifting their portfolios out of bonds and into riskier assets such as equities. We denote this as a "perverse valuation effect" making M&A more expensive. This interpretation and channel is unique to our study.
Keywords: Mergers and Acquisitions; Financial markets; Macroeconomy; European Union (search for similar items in EconPapers)
JEL-codes: E00 E02 G15 G34 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-com and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:185
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