An Anatomy of Industry Merger Waves. (5th October 2018)

• Record Type: Journal Article
• Authors: Bianchi, Daniele; Chiarella, Carlo
• Is Part Of: Journal of financial econometrics. Volume 17:Number 2(2019:Spring)
• Page Start: 153
• Page End: 179
• Publication Date: 2018-10-05
• Subjects: Markov chain Monte Carlo -- Markov regime-switching -- mergers and acquisitions -- Poisson regression -- time-varying probabilities; C11 -- C22 -- C24 -- C58; Capital market -- Law and legislation -- Periodicals; Financial institutions -- Law and legislation -- Periodicals; 338.544205
• DOI: 10.1093/jjfinec/nby025
• Languages: English
• ISSNs: 1479-8409

Abstract

Abstract: We propose a novel panel Bayesian Markov regime-switching Poisson regression model with time-varying transition probabilities to test existing theories on the driving forces of wave-like patterns in same-industry mergers and acquisitions. We show that the dynamics and persistence of merger waves change substantially in the cross-section of deal flow. This suggests that any inference on existing economically justified competing explanations of merger waves at the aggregate market level could be misleading, as the observed cross-industry heterogeneity in waves is shown to be the consequence of different responses to common or distinct drivers of merger activity.