Mergers and Industry Characteristics

Mergers and Industry Characteristics

The purpose of this study is to identify industry characteristics related to the merger activities in U.S. manufacturing industry during the year 1981-1985. This study shows that both horizontal and non-horizontal mergers are more likely to occur in an industry with high cash flow. It seems to support the free cash flow hypothesis that mergers occur to eliminate the agency costs associated with free cash flow.

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