Private and Public Merger Waves

We examine the participation of public and private firms in merger waves and productivity outcomes. We show that public firms participate more than private firms as buyers and sellers of assets and their participation is more cyclical. Public firms are affected more by credit spreads and aggregate market valuation. Public firm transactions are also impacted positively by their stock market valuations and liquidity. Public firm acquisitions realize higher gains in productivity, particularly when their transactions occur on-the-wave and when their firms' stock is liquid and highly valued. We show that our results are not just driven by the fact that public firms have better access to capital. Using productivity data from early in the firm's life, we find that better private firms subsequently select to become public and that these initial conditions predict higher participation in asset purchases and sales five and more years later.

[1]  Andrei Shleifer,et al.  Do Managerial Objectives Drive Bad Acquisitions? , 1989 .

[2]  S. Viswanathan,et al.  Valuation Waves and Merger Activity: The Empirical Evidence , 2004 .

[3]  René M. Stulz,et al.  Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave , 2004 .

[4]  Liu Yang.  The Real Determinants of Asset Sales , 2006 .

[5]  Y. Mundlak.  On the Pooling of Time Series and Cross Section Data , 1978 .

[6]  P. Rau,et al.  Patterns in the Timing of Corporate Event Waves , 2009, Journal of Financial and Quantitative Analysis.

[7]  Omer Brav.  Access to Capital, Capital Structure, and the Funding of the Firm , 2009 .

[8]  Erik Lie,et al.  Detecting Abnormal Operating Performance: Revisited , 2001 .

[9]  Vojislav Maksimovic,et al.  Conglomerate Firms and Internal Capital Markets , 2006 .

[10]  Credit Rating Targets , 2009 .

[11]  Amy K. Dittmar,et al.  The timing of financing decisions: An examination of the correlation in financing waves , 2008 .

[12]  R. Oaxaca.  Male-Female Wage Differentials in Urban Labor Markets , 1973 .

[13]  Alexander Ljungqvist,et al.  Comparing the Investment Behavior of Public and Private Firms , 2011 .

[14]  Gerard Hoberg,et al.  Real and Financial Industry Booms and Busts , 2009 .

[15]  S. Fawcett,et al.  Initial Public Offerings: An Analysis of Theory and Practice , 2004 .

[16]  Andrea L. Eisfeldt,et al.  Capital Reallocation and Liquidity , 2006 .

[17]  W. Gray,et al.  The NBER Manufacturing Productivity Database , 1996 .

[18]  J. Heckman.  Sample selection bias as a specification error , 1979 .

[19]  M. Mitchell,et al.  The impact of industry shocks on takeover and restructuring activity , 1996 .

[20]  Erik Stafford,et al.  New Evidence and Perspectives on Mergers , 2001 .

[21]  Donald P. Morgan,et al.  Listening to Loan Officers: The Impact of Commercial Credit Standards on Lending and Output , 2000 .

[22]  Vojislav Maksimovic,et al.  The Market for Corporate Assets: Who Engages in Mergers and Asset Sales and are There Efficiency Gains? , 2000 .

[23]  Robert F. Bruner,et al.  The gains to bidding firms from merger , 1983 .

[24]  M. B. Wintoki,et al.  Implications of Data Screens on Merger and Acquisition Analysis: A Large Sample Study of Mergers and Acquisitions from 1992-2009 , 2010 .

[25]  René M. Stulz,et al.  Divestitures and the liquidity of the market for corporate assets , 2002 .

[26]  Irena Hutton,et al.  Merger-Motivated IPOs , 2009 .

[27]  Robert H Mcguckin,et al.  The Longitudinal Research Database (LRD): Status And Research Possibilities , 1988 .

[28]  Z. Griliches.  HYBRID CORN: AN EXPLORATION IN THE ECONOMIC OF TECHNOLOGICAL CHANGE , 1957 .

[29]  Jarrad Harford,et al.  The Importance of Industry Links in Merger Waves , 2012 .

[30]  J. Campa.  THE MARKET FOR MERGERS AND THE BOUNDARIES OF THE FIRM , 2006 .

[31]  Brad M. Barber,et al.  Detecting abnormal operating performance: The empirical power and specification of test statistics , 1996 .

[32]  Ron S. Jarmin,et al.  The Longitudinal Business Database , 2002 .

[33]  Dan Kovenock,et al.  Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions , 1997 .

[34]  S. Viswanathan,et al.  Market Valuation and Merger Waves , 2004 .

[35]  S. Viswanathan,et al.  Valuation waves and merger activity: The empirical evidence ☆ , 2005 .

[36]  B. Eckbo,et al.  Corporate Takeovers , 2008 .

[37]  J. Harford.  What drives merger waves , 2005 .

[38]  Private Equity and Employment , 2011 .

[39]  S. Mullainathan,et al.  Enjoying the Quiet Life? Corporate Governance and Managerial Preferences , 2003, Journal of Political Economy.

[40]  Matthew Rhodes-Kropf,et al.  The Market for Mergers and the Boundaries of the Firm , 2004 .

[41]  M. Petersen,et al.  Does the Source of Capital Affect Capital Structure? , 2003 .

[42]  Antoinette Schoar,et al.  Effects of Corporate Diversification on Productivity , 2002 .

[43]  Anil Shivdasani,et al.  Going Public to Acquire? The Acquisition Motive in IPOs , 2008 .

[44]  Michael L. Lemmon,et al.  Back to the Beginning: Persistence and the Cross-Section of Corporate Capital Structure , 2006 .

[45]  Roni Michaely,et al.  MARKETS TALK, FIRMS LISTEN: THE DYNAMICS OF REPEAT ACQUIRERS , 2007 .

[46]  J. H. Mulherin,et al.  Comparing Acquisitions and Divestitures , 2000 .

[47]  Vojislav Maksimovic,et al.  Do Conglomerate Firms Allocate Resources Inefficiently Across Industries? Theory and Evidence , 2002 .

[48]  Henri Servaes,et al.  The Value of Diversification During the Conglomerate Merger Wave , 1996 .