Measuring Price Effects of Concentration in Mixed Oligopoly: An Application to the Swedish Beef-slaughter Industry

Empirical studies of market power focus exclusively on industries with private firms. Yet, it is not uncommon to find private firms competing with public firms or cooperatives (coops) within the same market. We develop an empirical procedure for measuring market-power and cost-efficiency effects of concentration in mixed oligopoly consisting of coops and investment-owned firms (IOF) and apply the procedure to the Swedish beef-slaughter industry. We find that the cost-efficiency effect of coop concentration more than offset its market power effect, resulting lower beef prices. IOFs are found to be price-takers in both cattle procurement and beef sales.      

What drives capital flows? The case of cross-border M&A activity and financial deepening

What key roles do macroeconomic and financial variables play in the foreign direct investment (FDI) decision of firms? This question is addressed in this paper using a large panel data set of cross-border Merger & Acquisition (M&A) deals for the period 1990-1999. Various econometric specifications are built around the simple “gravity model” commonly used in the trade literature. Interestingly, financial variables and other institutional factors seem to play a significant role in M&A flows. In particular, the size of financial markets, as measured by the stock market capitalization to GDP ratio, has a strong positive association with domestic firms investing abroad. This result points to the importance of domestic financial conditions in stimulating international investment during the boom years of 1990s, and accords with the significant drop in cross-border M&As in recent years.     

The stock market performance of exploration-oriented and exploitation-oriented cross-border mergers and acquisitions: Evidence from emerging market enterprises

This study builds on insights from mergers and acquisitions (M&A) studies and the perspective that stock market performance is affected by the M&A strategies of firms. Past studies show that acquisitions are an effective way to exploit existing knowledge and explore new possibilities. We argue that stock market performance can be a response to exploration/exploitation strategies in the context of cross-border M&As by emerging market multinationals. Based on cross-border M&A data of Chinese multinationals, we find that exploration-oriented acquisitions have worse stock market performance than exploitation-oriented acquisitions. Furthermore, we find support for our premise that acquiring firms can reduce the risk of exploration-oriented acquisitions by having more high-discretion slack resources or by maintaining a high level of equity share of the target firm. In addition, acquiring firms perform better if they conduct exploration-oriented acquisitions in related industries. Our results contribute to a better understanding of exploration and exploitation in the context of M&As.     

Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity

We develop a general equilibrium model with heterogeneous firms to address two sets of questions: (1) what are the characteristics of firms that choose the various modes of foreign market access (exporting, greenfield FDI, and cross-border M&A), and (2) how does the international organization of production vary across industries and country-pairs? We show that the answers to these questions depend on the nature of firm heterogeneity. Depending on whether firms differ in their mobile or immobile capabilities, cross-border mergers involve the most or the least efficient active firms. The comparative statics on industry and country characteristics display a similar dichotomy.     

FDI,market signal and financing constraints of firms in China

On the basis of an augmented Euler equation, we use firm survey data provided by the World Bank to investigate the impact of FDI (foreign direct investment) on the financing constraints of firms in China. First we calculate the forward and backward linkages of FDI. Then through empirical estimation, we find that only private firms have financing constraints and that the incoming FDI alleviates this situation. Private firms with more foreign capital shares or having stronger vertical linkage with FDI can get financial resources easily. Furthermore, industries hosting a large amount of FDI are favorite clients of the financial institutions because they are usually much more competitive in the world. As a result, the private firms in these industries also have easier access to financial resources. In the financial market, FDI is a helping hand that reduces the information asymmetry between firms and financial institutions. Financial resources go where FDI goes, which to some extent improves the allocation efficiency.     

Do cross-border mergers and acquisitions increase short-term market performance? The case of Chinese firms

Despite the new momentum in cross-border mergers and acquisitions (M&As) by emerging market firms, we have a limited understanding of the impact of these activities. Drawing on signalling theory and the institution-based view, this paper examines the extent of stock market reactions to the announcement of cross-border M&A deals, based on an event study of a sample of Chinese firms during the period 2000–2012. The findings indicate that the announcement of cross-border M&As results in a positive stock market reaction; this effect is more significant in the mainland Chinese stock markets (Shanghai and Shenzhen) than that in the Hong Kong market. The shareholders of Chinese firms that acquire a target firm in a host country with a low level of political risk gain higher cumulative abnormal returns than those firms targeting companies in countries with a high level of political risk. The shareholders of Chinese state-owned enterprises experience lower abnormal returns compared with those of Chinese privately owned firms when engaging in cross-border M&A deals.     

Industry competition and firm human capital

This paper argues that objective and subjective human capital may have substantial impact upon organizational performance in a competitive context. Objective human capital pertains to such features as education and experience, whereas subjective human capital relates to personality characteristics. The argument is illustrated by presenting the results of two empirical studies: (1) a cross-section 1990–1991 analysis of about 50 incumbents in the Flemish furniture industry-concentrating on the impact of subjective human capital, particularly the Chief Executive Officer's (CEO's) locus-of-control personality, on financial performance; and (2) a longitudinal 1970–1992 analysis of a cohort of 100 entrants into the Dutch audit industry-focusing on the influence of objective human capital, particularly education and experience, on exit by merger and acquisition (M&A) or diaspora. Both studies support the claim that objective and subjective human capital matters: for example, Flemish furniture firms headed by a CEO with an internal locus-of-control trait reach higher levels of financial performance, and Dutch audit firms with a high proportion of personnel with business experience are more likely to exit the industry over the years as a result of diaspora. Finally, the data of the Flemish furniture and Dutch audit industries are re-analyzed so as to compare the impact of human capital variables on small-firm performance in both industries. This re-analysis reveals that in both industries the impact of human capital variables is more pronounced in large firms compared to small businesses.     

Firm Turnover and Productivity Growth in Canadian Manufacturing and Services Industries, 2000 to 2007

This paper examines the differences and similarities in the nature of the competitive process for a cross section of Canadian industries. It studies the intensity and the effectiveness of entry, the relationship between turnover within incumbents and the intensity of entry, and the failure process underlying the exit of entrants. Finally, it asks how differences in these processes relate to the contribution that turnover makes to productivity growth. Differences across industries both in the effectiveness of the entry process and the contribution of turnover to productivity growth are related to the conditions that permit entry at relatively large scale and regulatory conditions in the industry. Industries where entrants are capable of establishing a relatively large footprint are generally those where entrants capture more of the market, where there is more intense turnover among incumbents and where a larger proportion of productivity growth comes from turnover due to both entry and exit and changes in the market position of incumbents. Industries where regulation attenuates freedom of entry have a different though related profile. Even here, turnover contributes to productivity growth.     

Entrepreneurial Enterprises,Large Established Firms and Other Components of the Free-Market Growth Machine

The paper studies the principal influences accounting for the unprecedented growth and innovation performance of the free-market economies. It indicates that vigorous oligopolistic competition, particularly in high-tech industries, forces firms to keep innovating in order to survive. This leads them to internalize innovative activities rather than leaving them to independent inventors, and turns invention into an assembly-line process. The bulk of private R&D spending is shown to come from a tiny number of very large firms. Yet the revolutionary breakthroughs continue to come predominantly from small entrepreneurial enterprises, with large industry providing streams of incremental improvements that also add up to major contributions. Moreover, these firms voluntarily disseminate much of their innovative technology widely and rapidly, both as a major revenue source and in exchange for complementary technological property of other firms, including direct competitors. This helps to internalize the externalities of innovation and speeds elimination of obsolete technology. Some policy implications for industrialized and developing countries are also discussed.     

产品市场竞争与资本结构的战略决策

“有限负债效应”理论指出,企业提高财务杠杆导致了产出的增加,但很多实证研究却难以支持这一结论。本文分析了在上游企业外部规模效应较强的情况下,企业债务融资战略效应为负的理由,证明了不存在外部规模效应是债务融资战略的重要条件。企业的融资行为深受财务危机的影响,其中企业规模、产业集中度、产品专用性、R&D支出和行业前景是决定财务危机成本大小的关键变量,因此,以财务危机成本为依据进行决策,企业会自我限制债务水平。由此,企业资本结构的决策应从产品市场竞争状况去考虑,这对我国企业融资决策有重要意义。     

How Swiss small and medium-sized firms assess the performance impact of mergers and acquisitions

While previous studies on mergers and acquisitions (M&As) mostly relied on large firms, our study is based on a sample that includes all Swiss M&As that took place in the period 2006–2008, mostly of which have been SMEs. We investigate the firm characteristics that determine the innovation and economic performance of M&As. The performance measures are based on firms’ assessments. These measures are regressed on a series of possible determining factors as postulated in existing theoretical and empirical literature. M&A performance is primarily affected by specific M&A characteristics, but not by general market characteristics such as demand development or competition conditions. Rather astonishingly, it is also not affected by firm characteristics such as capital intensity, human capital endowment and firm size. There is an interesting exception: innovation activities. This means that, with the remarkable exception of innovation activities, the level of M&A performance is determined primarily by factors of the M&A process itself.     

The determinate effects of competences and decision process factors on firms' internationalisation

This study introduces the current situation of Taiwan's financial industries and presents a literature review including competences, competitive advantage, and key factors under the process of the international investment decision, and internationalisation. The study takes a ‘triangulation’ approach that uses both qualitative and quantitative methods in the exploration of the internationalisation of Taiwan financial markets. Sampling targets of the research consist of managers from banks, security firms, and insurance firms in Taiwan. The findings highlight perceptions of factors such as resources, skill, market knowledge, and international investment experience of firms aiding the internationalisation of Taiwan financial industry. Further, this study reveals that firms' internationalisation relates positively to the firms performance.     

The Dynamics of Listed SMEs in China

We examine the dynamics of Chinese listed SMEs with respect to their post-market viability and growth after going public. The Kaplan–Meier estimation shows that SMEs are more likely to transition to a non-viable state than large firms. Further examination using the Cox model and the random effects model shows that SME dynamics are shaped by heterogeneous firm and industry characteristics, as well as the underlying financial and institutional environments. SME viability is distinguished by its ability to grow through learning along with age, aided by lower business risk, more focused business, easier access to equity finance, and less exposure to competition in remote regions. SME growth is constrained by a dispersed ownership structure, insufficient infrastructure to protect firms which are active in R&D, and the limited financing role of equity markets. The study also reveals that government initiatives in support of strategic development in the service industries and in the coastal regions are of importance in spurring SME growth.     

Market power and systematic risk

This paper examines the relationship between market power variables and the systematic risk, beta, of a firm. The study controls for the effects of dividend policy, liquidity, and earnings growth. Market power is measured by firm size (both sales and assets), proportion of industry sales, and the industry's four-firm concentration ratio. The study finds only a weak relationship between individual firm market power and firm risk, but there is evidence of a strong negative relationship between industry concentration and the market risk of the firms in an industry. This indicates that firms in concentrated industries experience lower capital costs than firms in less-concentrated industries. The existence of limit pricing is suggested as an explanation for this finding.     

Labour productivity in M&As: industry sector vs. services sector

Due to the high failure rate of the mergers and acquisitions (M&A) strategy, this study raises the questions of whether the pre-M&A performances of the acquirer and the target could predict improvement in labour productivity in the post-M&A period. The study also conducted sector analysis by comparison between three groups of the sample: the industry sector M&As, the services sector M&As and the all sectors M&As. The study uses a sample of 394 public firms from 13 countries that were involved in M&As. The study highlights the differences between the sectors. Buying a larger target in the services sector may not hinder the labour productivity in the post-M&A period, while in the industry sector, it may end in a negative influence on labour productivity. The study also shows that the labour productivity is higher in the services sector compared to the labour productivity in the industry sector, particularly during the integration stage.     

Quality shock vs. market shock: Lessons from recently established rapidly growing U.S. startups

The 2003 Fortune 500 Index includes 358 firms that had been newly listed within the previous 10 years; historically this is a large number of firms in a relatively short time period. In particular, among the 358 new Fortune 500 entrants founded after 1975, 44 are defined as “rapid-growth” startups. Simulation results based on a discrete-choice racing model demonstrate that they were able to outperform their early competitors through a quality innovation race. They were resistant to hostile M&A attempts as well. According to the empirical results, a quality shock affects the size growth and profitability of the rapid-growth startups more than a market shock does, which indicates that such superior performance owes to firm-specific innovation ability rather than to market fluctuations.     

Impact of the Financial Crisis on Cross‐Border Mergers and Acquisitions and Concentration in the Global Banking Industry

The global banking industry has seen dramatic changes in the past 40 years. Most recently, the financial liberalization of emerging markets and the global financial crisis have significantly impacted the market share of banks worldwide. This article investigates the impact of the 2007–2008 financial crisis on cross‐border mergers and acquisitions (M&As) in the banking sector and emphasizes the role of emerging‐market banks in the postcrisis consolidation trend. Using M&A data and concentration data over the period 2000–2013, our analysis indicates that the financial crisis had a significant impact on worldwide M&As, especially on the direction of the transactions. Emerging‐market banks appear to be major acquirers in the postcrisis period, targeting both neighboring countries and developed economies in Europe. We also observe an increase in bank concentration in developed markets most hit by the financial crisis, especially in the United States and the United Kingdom, whereas bank concentration decreased in emerging markets. © 2015 Wiley Periodicals, Inc.     

Do mergers and acquisitions promote trade? Evidence from China

Many studies have shown that mergers and acquisitions (M&A) raise firms' productivity. Few researches investigate whether exporters can enhance export performance after M&A through higher levels of efficiency. Based on detailed information on M&A activities of Chinese firms, China's customs trade data and National Bureau of Statistics surveys, we investigate the causal effect of M&A on trade performance. In particular, the value and the volume of firm exports, product quality, product scope and the number of export destinations have been examined. We find positive and significant effects of M&A on all the examined indicators of export performance. These findings are generally robust to a variety of robustness checks. We further observe that state-owned firms are the least likely to benefit from M&A. We also obtain evidence that firms benefit more from M&A deals if they are targets or merge with foreign firms. Overall, this paper is to our knowledge the first study that uses micro-level data in multiple industries to examine the relationship between M&A and exports of heterogeneous firms. Our results deepen our understanding of the consequences of M&A by suggesting another potential benefit, and hence provide policy implications for merger regulation.     

How does FDI inflow affect productivity of domestic firms? The role of horizontal and vertical spillovers,absorptive capacity and competition

This paper examines the existence of externalities associated with foreign direct investment (FDI) in a host country by exploiting firm-level panel data covering the Polish corporate sector. We distinguish between horizontal spillovers (from foreign to domestic firms operating in the same industry) and two types of vertical spillovers: backward (from FDI in downstream industries) and forward spillovers (from FDI in upstream industries). The main findings are as follows. Local firms benefit from foreign presence in the same industry and in downstream industries. The absorptive capacity of domestic firms is highly relevant to the size of spillovers: vertical spillovers are larger for R&D-intensive firms, while firms investing in other (external) types of intangibles benefit more from horizontal spillovers. Competitive pressure facilitates backward spillovers, while market power increases the extent of forward spillovers. Horizontal spillovers are particularly strong in services, while the remaining results, including backward spillovers and the role of absorptive capacity and competition, are mainly driven by manufacturing. Host country equity participation in foreign firms is consistent with higher unconditional productivity spillovers to domestic firms. A number of robustness checks yield results qualitatively similar to those obtained in the baseline specification.     

The determinants of new firm formation in italian manufacturing

This paper focuses on entry of small firms in the manufacturing industries. It is argued that the exit option can be viewed as an insurance against risks of failure, increasing the likelihood of entry in an uncertain environment; the result is implicit in recent stochastic models of competition and entry decision under uncertainty. A regression model of industry birth rates in the Italian manufacturing industries provides empirical evidence on the impact of factors determining the decision to enter and the supply of new entrepreneurs. In our estimates, yearly entry rates are found to decrease with entry costs and barriers and to increase with market growth, expected growth of small firms, risks of failure and an index of spatial concentration of activities.