The timing of mergers along the production chain, capital structure, and risk dynamics

Monika Tarsalewska

Journal of Banking & Finance, 2015, vol. 57, issue C, 51-64

Abstract: I demonstrate that the timing of vertical mergers is generally dependent on industry characteristics. My predictions are consistent with empirically observed patterns of vertical mergers. I show that merger activity during economic upturns tends to be motivated by operating efficiencies, while merger activity during economic downturns tends to occur as a means of keeping production chain operational. Mergers allow firms to capture synergies and improve efficiencies in order to survive economic contractions. The pricing framework implies that a vertical merger decision usually reduces risk during two different economic states.

Keywords: Vertical mergers; Real options; Risk (search for similar items in EconPapers)
JEL-codes: D23 D24 G12 G13 G34 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:57:y:2015:i:c:p:51-64

DOI: 10.1016/j.jbankfin.2015.03.014

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