Merger Strategies and Capital Market Risk
Corporate diversification literature suggests a connection between the relatedness of merging firms and risk. This idea is tested by classifying 297 large mergers (obtained from a list of acquiring companies assembled by combining the 1954-1973 Federal Trade Commission large merger series and the Ce...
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| Veröffentlicht in: | Academy of Management journal 1987-12, Vol.30 (4), p.665-684 |
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| creator | Lubatkin, Michael O'Neill, Hugh M. |
| description | Corporate diversification literature suggests a connection between the relatedness of merging firms and risk. This idea is tested by classifying 297 large mergers (obtained from a list of acquiring companies assembled by combining the 1954-1973 Federal Trade Commission large merger series and the Center for Research in Security Prices monthly returns file) into 4 relatedness categories. These are: 1. single-business mergers, 2. vertical strategies, 3. product-concentric strategies, and 4. conglomerate mergers. The 3 measures of risk used are unsystematic, systematic, and total. A bear market subgroup of 80 mergers completed during times of market decline and a bull market subgroup of 134 mergers completed during periods of growth or stability then are constructed. It is shown that risk reduction may be a valid rationale for mergers but not for the reasons usually cited. All kinds of mergers are linked to substantial increases in unsystematic risk. However, related mergers are connected with a significant decline in systematic and total risk. |
| doi_str_mv | 10.5465/256154 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0001-4273 |
| ispartof | Academy of Management journal, 1987-12, Vol.30 (4), p.665-684 |
| issn | 0001-4273 1948-0989 |
| language | eng |
| recordid | cdi_proquest_journals_199830652 |
| source | Periodicals Index Online; EBSCOhost Business Source Complete; Alma/SFX Local Collection |
| subjects | Acquisitions & mergers Bear markets Bull markets Diversification Market positioning Mathematical models Portfolio management Risk Statistical analysis Systematic |
| title | Merger Strategies and Capital Market Risk |
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