Testing merger and acquisition sensitivity to changes in firm resources
Abstract/Contents
- Abstract
- This dissertation adapts a model of market discipline developed by Zweibel (1994) to describe how managers should use internal resources in the market for mergers and acquisitions. Prior literature, namely Harford (1999), has argued that additional cash on hand leads firms to undertake further merger activity. This paper argues that a more careful examination of the data demonstrates that this pattern does not hold in the data and also offers a simple model to explain why exogenous increases in a firm's cash holdings should not lead a manager to spend more money on either mergers and acquisitions or on capital expenditure, if both are viewed as wasteful or value decreasing spending at the margin. This dissertation adapts Rauh's (2005) use of pension funding status to identify exogenous changes in the level of cash holdings and then uses a Tobit model to test whether or not additional cash holdings leads firms to accumulate more capital or spend more on mergers and acquisitions. This dissertation finds that having more exogenous cash on hand does not lead to more merger and acquisitions spending or capital expenditure. The marginal expenditure on mergers and acquisition activity in also calculated as part of the study. Whether one uses instruments or not, the marginal expenditure is very small, suggesting that firms do not waste a significant amount of resources on merger and acquisition activity on the margin. This finding also suggests that stock price responses to merger and acquisitions announcements must be due to the dilution of shareholders value, revelation of a manager's characteristics, or some other factor besides the loss of a firm's assets.
Description
| Type of resource | text |
|---|---|
| Form | electronic; electronic resource; remote |
| Extent | 1 online resource. |
| Copyright date | 2009 |
| Publication date | 2010, c2009; 2010 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Associated with | Maddux, Ryan Andrew |
|---|---|
| Associated with | Stanford University, Department of Economics |
| Primary advisor | Klenow, Peter J |
| Thesis advisor | Klenow, Peter J |
| Thesis advisor | Bloom, Nick, 1973- |
| Thesis advisor | Zwiebel, Jeffrey |
| Advisor | Bloom, Nick, 1973- |
| Advisor | Zwiebel, Jeffrey |
Subjects
| Genre | Theses |
|---|
Bibliographic information
| Statement of responsibility | Ryan Andrew Maddux. |
|---|---|
| Note | Submitted to the Department of Economics. |
| Thesis | Thesis (Ph.D.)--Stanford University, 2010. |
| Location | electronic resource |
Access conditions
- Copyright
- © 2010 by Ryan Andrew Maddux
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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