Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7362143 | Journal of Financial Economics | 2017 | 55 Pages |
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.
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Authors
Oliver Levine,