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on Industrial Organization |
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Issue of 2007‒08‒14
four papers chosen by |
| By: | D. Dragone; L. Lambertini; A. Mantovani |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:591&r=ind |
| By: | L. Lambertini |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:598&r=ind |
| By: | Dirk Hackbarth (Department of Finance, Olin School of Business, Washington University in St. Louis); Jianjun Maio (Department of Economics, Boston University and Department of Finance, the Hong Kong University of Science and Technology) |
| Abstract: | This paper develops a continuous time real options model to study the interaction between industry structure and takeover activity. In an asymmetric industry equilibrium, firms have an endogenous incentive to merge when restructuring decisions are motivated by operating and strategic benefits. The model predicts that (i) the likelihood of restructuring activities is greater in more concentrated industries or in industries that are more exposed to exogenous shocks; and (ii) the magnitude of returns arising from restructuring to both merger firms and rival firms are higher in more concentrated industries. While recent real options models contend that competition erodes the option value of waiting and hence accelerates the timing of mergers, in our model, increased competition delays the timing of mergers. |
| Keywords: | industry structure; anticompetitive effect; real options; takeovers. |
| JEL: | G13 G14 G31 G34 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:bos:wpaper:wp2007-018&r=ind |
| By: | Jason Allen; Ying Liu |
| Abstract: | The authors examine the degree of contestability in the Canadian banking system using the <em>H</em>-statistic proposed by Panzar and Rosse (1987) and modified by Bikker, Spierdijk, and Finnie (2006). A modification is necessary because the standard approach of controlling for size using total assets leads to an upward bias in the <em>H</em>-statistic. The authors propose a variety of model specifications and test for contestability using detailed quarterly balance-sheet data from 2000 to 2006. Contrary to Bikker, Spierdijk, and Finnie (2006), the authors find that the Canadian banking sector is in equilibrium and characterized by monopolistic competition. This result is in line with earlier studies of the Canadian banking sector (Nathan and Neave 1989) as well as cross-country studies that use cruder measures of Canadian banking inputs (Claessens and Laeven 2005). As in Bikker, Spierdijk, and Finnie (2006), the authors show that projecting revenue on total assets leads to an upward bias regarding the level of competition. |
| Keywords: | Financial institutions |
| JEL: | E5 E6 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:07-7&r=ind |