The Dynamics within Merger Waves

Doctoral Thesis / Dissertation from the year 2008 in the subject Business economics - Banking Stock Exchanges Insurance Accounting grade: Summa cum Laude European Business School - International University Schloß Reichartshausen Oestrich-Winkel language: English abstract: Empirical corporate finance research analyzes the link between major corporate decisions and the shareholder value development of the respective companies. Enhancing the welfare of shareholders is a fundamental and common objective of all firms and corporate managers are required to implement policies consistent with shareholder welfare. However the financial literature shows that major corporate decisions are not associated with stock market gains to the respective companies. Especially the mergers and acquisitions related literature shows that the returns to bidding firm shareholders are essentially zero when they pursue an acquisition. Due to these empirical results there is an ongoing debate why so many value decreasing decisions occur and how the success of corporate actions is related to company specific internal characteristics and the firms' external environment. Timo Gebken's dissertation contributes to this debate. Timo links the time series behavior of industry specific M&A activity to the shareholder wealth effects of the transactions. The majority of deals within an industry occur in very short time periods so called industry merger waves. These industry merger waves are characterized by a fast consolidation process which drastically changes the competitive environment for all firms within the industry. Timo analyzes how and why this rapidly changing environment influences the shareholder wealth effects of M&A activity. His results show that the gains associated with transactions change dramatically during an industry merger wave. At the beginning of an industryspecific consolidation process mergers and acquisitions are accompanied by significantly positive retur