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on Industrial Organization |
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Issue of 2016‒07‒23
five papers chosen by |
| By: | Ioannis G. Samantas (University of Athens) |
| Abstract: | This study examines whether the effect of market structure on financial stability is persistent, subject to current regulation and supervision policies. Extreme Bounds Analysis (EBA) is employed over a sample of 2450 banks operating within the EU-27 during the period 2003-2010. The results show an inverse U-shaped association between market power and soundness and a stabilizing tendency in markets of less concentration, where policies lean towards limited restrictions on non-interest income, official intervention in bank management and book transparency. Regulation significantly contributes as a stability channel through which bank competition policy is optimally designed. |
| Keywords: | Market power; financial stability; regulation; extreme bound analysis |
| JEL: | D21 D4 L11 L51 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:bog:wpaper:209&r=ind |
| By: | Theodosios DIMOPOULOS (University of Lausanne and Swiss Finance Institute); Stefano SACCHETTO (Tepper School of Business, Carnegie Mellon University) |
| Abstract: | We study a dynamic industry-equilibrium model that features mergers, entry, and exit by heterogeneous firms. We show how different sources of synergies affect merger cyclicality. Improvements in marginal productivity between merging firms generate a procyclical motive for mergers, while reductions in fixed costs of production generate a countercyclical one. The presence of a merger market makes poorly performing firms less likely to exit the industry in recessions, and it increases the mean and variance of the cross-sectional distribution of firm-level productivities. Consistent with the empirical evidence, we show that announcement returns for large acquirers are lower than for small acquirers, despite large acquirers' higher Tobin's Q. |
| Keywords: | Mergers, Industry Equilibrium |
| JEL: | D21 D92 E22 E32 G34 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1456&r=ind |
| By: | Petrakis, Emmanuel; Moreno, Diego; Manasakis, C.; Cabolis, C. |
| Abstract: | We study a homogenous good triopoly in which firms first choose their cost-reducing R&D investments and consider alternative merger proposals, and then compete à la Cournot in the ensuing industry. We identify conditions under which both horizontal mergers and non integration are sustained by Coalition-Proof Nash equilibria (CPNE). These conditions involve the effectiveness of the R&D technology, as well as the distribution of the bargaining power between the acquirer and the acquiree, which determine the allocation of the incremental profits generated by the merger. We show that whether firms follow duplicative or complementary research paths, sustaining a merger generally requires a sufficiently effective R&D technology that creates endogenous cost asymmetries and renders the merger profitable, and a moderate distribution of bargaining power that allows to spread the benefits of the merger. We examine the welfare effects of mergers and obtain clear policy guidelines. |
| Keywords: | Coalition-Proof Nash Equilibrium; Antitrust; Endogenous Efficiency Gains; Cost-Reducing Innovation; Horizontal Mergers |
| Date: | 2016–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:23280&r=ind |
| By: | Yasin ÇİLHOROZ (Hacettepe University); Cuma SONÄžUR (Hacettepe University); Mehmet GÖZLÜ (Hacettepe University); Murat KONCA (Hacettepe University) |
| Abstract: | Until the begining of 1990s, firms had been looking ways to attain the competitive advantage and increase their profitabilites depending on it by realizing economies of scale or benefiting from market failure. Nowadays, with the impact of globalization, particularly great companies have started to purchase other firms or merge with them as a growth strategy. Pharmaceutical industry has the first place where the mergers and acquisitions occur mostly. Among the drives that leads pharmaceutical firms to mergers or acquisitions; high costs of research and development, economies of scale, motivation for new markets, efforts to improve the existing marketing possibilities, trying to keep up with competition can be counted. The aim of this study is to discuss mergers and acqusisitions in pharmaceutical sector and to evaluate global pharmaceutical industry in this terms. |
| Keywords: | Merger, Acquisition, Growth Strategy, Pharmaceutical Industry |
| JEL: | F23 G34 L65 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:4006562&r=ind |
| By: | Jan Zabojnik (Queen's University) |
| Abstract: | This paper studies a repeated-game model in which firms can build a reputation for rewarding innovative employees. In any Pareto efficient equilibrium, low-value innovations get developed in established firms, while high-value innovations get developed in startups. The threshold level can be discontinuous, so otherwise similar firms may exhibit very different levels of innovation. The paper also shows that the optimal incentive contract for innovative employees has an option-like form, and that a firm may want to worsen the distribution of possible innovations. The model's predictions are consistent with a broad set of observed regularities regarding the creation of employee startups. |
| Keywords: | Startups, innovation, reputation, venture capital |
| JEL: | L14 L26 O31 O34 M13 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1362&r=ind |