Kastrinaki, Zafeira (2006) Macroeconomic and microeconomic approaches to the analysis of merger waves in the UK. PhD thesis, University of Warwick.

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Abstract

This study attempts to improve our understanding of the nature of mergers and
their timing. It is motivated by the inability of empirical evidence at the microlevel
to provide strong statistical results for the motivation of mergers in different
periods. At the macro-level, the apparently stronger results of some studies have
been insufficient to form the basis for a widely accepted theory of merger timing.
Although the predictions are closer to the observed procyclical and episodic
behaviour of the process, the findings of the macro-literature have been limited,
in most cases, to confirmation of what is evident by casual observation.
This study purports to create a framework that encompasses both the macro- and
micro-environment of a company which may enhance understanding of the
dynamic behaviour of merger activity in the UK. At the macro-level, we use
frequency domain techniques to empirically examine the existence of merger
waves and their relation to economic fundamentals. The empirical approach
taken allows the identification of merger waves with different duration,
regularity, and power, and reports their relation to macro- and financial factors
along these waves. Having identified the explanatory power of macro- and
financial factors, as well as the timing pattern of aggregate mergers, we search
for complementary driving forces of the process at the micro-level.
At the micro-level, a theoretic-decision model is constructed to explain merger
timing which incorporates the most prevalent theoretical and empirical
explanations, suggested by industrial organization and finance literature, into a
dynamic framework. The model exploits the dynamics of the merger process by
assuming that motives change over time because of changes in firm-specific
characteristics and in merger activity per se. The model stresses the endogenous
character of mergers by explicitly incorporating past, current, and future mergers.
The theoretical model is estimated, using merger data from the UK from 1990 to
2004. The empirical approach taken is survival analysis. Such an approach
explicitly allows for dependency over time, in that it estimates the conditional
probability of merger; that is, the probability of merger by time t, given that is
has not occurred by time t-1. It is ideally suited to empirically examine the
merger timing, since it allows us to investigate whether, given that a firm has survived up to a certain point in time, changes in firm-specific characteristics or
changes in merger activity per se will lead to a change in the timing of a merger.
Findings of the macro-level provide evidence that fairly regular long waves as
well as a less regular, less powerful waves of mergers exist. Even though no two
merger waves are identical, they usually have some important features in
common. Their coherence with macro- and financial factors varies in strength
over waves of different duration and regularity. The findings at the micro-level
provide strong evidence of the endogenous character of mergers. A combination
of a range of micro-forces is the driving force within a wave which keeps the
bandwagon rolling at full speed. As a consequence, macro-factors may pave the
way for the development of initial merger activity, while micro-forces fuel
merger diffusion and build the dynamics within a wave.

Item Type:	Thesis (PhD)
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Library of Congress Subject Headings (LCSH):	Consolidation and merger of corporations
Official Date:	December 2006
Dates:	Date Event December 2006 Submitted
Institution:	University of Warwick
Theses Department:	Warwick Business School
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Stoneman, Paul ; Angwin, Duncan
Sponsors:	Warwick Business School
Extent:	xiii, 278 leaves
Language:	eng

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