Acquiring growth

Oliver Levine

Journal of Financial Economics, 2017, vol. 126, issue 2, 300-319

Abstract: I develop a model of mergers in which M&A deals are used to reallocate investment opportunities. In equilibrium, acquirers lack internal growth options and seek out projects from targets in the M&A market. The model is able to reconcile many features of the merger data that I document, including the high productivity, investment, and valuation of target firms. Furthermore, in my model, profitability is highly predictive of acquisition, and merger transactions naturally lead to a substantial drop in profitability despite creating value for the acquirer.

Keywords: Mergers and acquisitions; Growth options; Intangible capital; Corporate investment (search for similar items in EconPapers)
JEL-codes: G31 G32 G34 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X17301484
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:126:y:2017:i:2:p:300-319

DOI: 10.1016/j.jfineco.2017.07.001

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().