When to buy or sell in supply chains with the presence of mergers

Xunxiao Wang, Chongfeng Wu and Weidong Xu

International Journal of Production Economics, 2015, vol. 163, issue C, 137-145

Abstract: This paper investigates the timing of buying and selling in supply chains with mergers consisting of suppliers and manufacturers whose costs and revenues are uncertain, respectively. Based on the real option theory, we recognize the option value of waiting for a better trading timing in a setting that mergers occur in suppliers or manufactures. Moreover, our findings enable us to capture more accurately such characteristics of mergers as synergy effects and diversification effects, which play key roles in firm׳s capital investment decisions. Furthermore, the results display the characteristics of whether merger waves are clustered by industries, captured by correlation coefficient ρ. Finally, in order to address the impact of mergers on the trading timing, we, in the light of the situation before and after the merges, perform comparative analysis on strategies of the buying and selling, which clearly shows the differences of trading actions in the two scenarios.

Keywords: Mergers; Trading timing; Uncertain; Real option (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:proeco:v:163:y:2015:i:c:p:137-145

DOI: 10.1016/j.ijpe.2015.02.022

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