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RESEARCH economies of scale are exhausted has registered an increase. From Table 4, one can observe that in respect of all the firms taken together the coefficient of βQt is negative. It means that on an average, scale economies have increased over time in case of merged firms. That is the size of minimum efficient firm has increased. The finding shows that when firms merge, they are able to increase the range of output over which they can reduce their long run average cost. That is they can enjoy positive scale economies over an expanded output range. βQt is negative in case of Indian and Malaysian firms but is positive for Brazil. It means that in case of Brazilian mergers scale economies is declining over time and the range of output over which minimum long run average cost can be achieved is falling. Let us now examine the rate of technical change. The coefficients of the rates of technological change are also presented in Table 8. The estimates are arrived at in accordance with equation (18). In respect of the total sample the rate of technical change is .00176. That is there is a decrease in total cost at a rate of 0.17% per annum. Similarly positive rates of technological change are observed in case of individual countries also. The estimates clearly show that M & A result in technical change across countries. To gain further insight into the nature of technological change, input bias in it can be measured according to equation (19). The coefficients of input bias are presented in Table 8. It can be observed that the coefficients are negative in case of labour and capital of total sample which means there are factor saving technological advancements in respect of labour and 62 Need the Dough July-October - 2007 capital. The positive coefficient in respect of materials indicates that the technological advancement is material using. In case of Indian firms the technological advancement is labour and materials saving but capital using and in case of Brazil it is labour saving but materials and capital using. In Malaysia technological advancement is factor saving on account of labour, capital as well as materials. Lastly, we examine whether technological change increases scale economies or decreases these as per equation (20). It can be seen from Table 8 that the coefficient of technological scale bias is positive in case of overall sample as well as India and Malaysia. It is negative in case of Brazil. This implies that the technological change is increasing the economies of scale, that is the increase in output level at which long run average cost will be minimum, is expanding due to technological innovations. This finding indicates that merged firms are likely to introduce technological innovations. In conclusion, it can be stated that M & A activity leads to structural shift in the profitability after merger as well as economies of scale and technological innovations. The economies are factor saving and increase the range of output over which the economies can be availed. Technological innovations also contribute to these economies. The study thus supports the hypotheses that mergers lead to both improvement in internal management and unlock synergy. References: ● Baumol, W.J. (1967) Business Behavior, Value, and Table 8 Resuls of Analysis of Scale Economies and Technological Change Growth. Harcourt, Brace, and World: New York, NY. ● Bhuyan, Sanjib (2002) Impact Of Vertical Total Sample India Brazil Malaysia Mergers On Industry Profitability: An Coefficient 1.29095 1.38558 1.09188 1.21024 Empirical Evaluation, Review of Industrial of Scale Elasticity Organization (20),61-79. ● Blair, R.D., Kaserman, D.L.(1978) Vertical Integration, Tying, And Antitrust Coefficient 0.00176 0.03219 0.00508 0.00669 Policy, American Economic Review 68, of Rate of 397-402. Technological Change ● Carlton, D. W.(1979) Vertical Integration In Competitive Markets Under Input Bias in Technological Change Labour -0.00612 -0.03398 -0.00363 -0.00660 Uncertainty,Journal of Industrial Economics 27, 189-209. ● Christiano, L.J. (1992) Searching for a Capital -0.01100 0.00152 0.01379 -0.00097 Break in GNP, Journal of Economic and Materials 0.04560 -0.00032 0.01366 -0.00535 Business Studies,10, 237-250. ● Coase, R.H.(1937) The Nature Of The Technological Scale Bias ( -βQt ) -(-0.07590) -(-0.00194) 0.01032 -(-0.01387) Firm, Economica 4, 386-405. ● Copeland, Tom, Kotler, Tim & Jack Murrin. (1990) Valuation, Measuring And
MERGERS & ACQUISITIONS The Value Of Companies. New York, Wiley. ● Cuthbertson Keith, Hall ,Steven G., and Mark P. Taylor. (1995) Applied Econometric Techniques, The University of Michigan Press. p.130. ● Dickey D.A. and W.A. Fuller .(1979) Distribution of the Estimators for Autoregressive Time Series with a Unit Root, Journal of the American Statistical Association, 74, 427-431. See also W.A. Fuller, Introduction to Statistical Time Series, John Wiley & Sons, New York, 1976. ● Fama, E.F., L. Fisher, M.C. Jensen, and R. Roll. (1969) The adjustment of Stock Prices to New Information, International Economic Review 10, 1-21. ● Franko, L.G. (1989) Global Corporate Competition: Who’s Winning, Who’s Losing And The R&D Factor As One Reason Why, Strategic Management Journal, 10: 449-474. ● Healy, M.H., K.G. Palepu and R.S. Ruback. (1992) Does Corporate Performance Improve After Mergers Journal of Financial Economics, 31, 135-175. ● Jarrell, G.A., J. Brickley and J. Netter.(1988) The Market For Corporate Control: The Empirical Evidence Since 1980, Journal of Economic Perspectives, 2, 49-68. ● Jensen, M.C. (1988) The Takeover Controversy: Analysis and Evidence,” Knights,Raiders, and Targets: The Impact of Hostile Takeover. J.C. Coffee, Jr., L.Lowenstein, and S. Rose-Ackerman (Eds.), Oxford University Press: Oxford, UK. ● King, D., Dalton, D., Daily, C., and J. Covin. (2004) Meta-Analyses Of Post-Acquisition Performance: Indication Of Unidentified Moderators, Strategic Management Journal, 25:187-200. ● Klein, B., Crawford, R. A., Alchian, A. A.(1978) Vertical Integration, Appropriable Rents, And The Competitive Contracting Process, Journal of Law and Economics 21, 297-326. ● Lichtenberg, F., and D. Siegel. (1992) Productivity and Changes in Ownership of Manufacturing Plants, Corporate Takeovers and Productivity. F.R. Lichtenberg (Ed.), The MIT Press: Cambridge, MA. ● Manne, H.G. (1965) Mergers and the Market for Corporate Control. Journal of Political Economy 73,110- 120. ● McGuckin, R.H., and S.V. Nguyen.(1995) On Labor Productivity and Plant Ownership Change: New Evidence from the LRD. The Rand Journal of Economics (26:2) , 257-276. ● Meade, J.E. (1968) Is the New Industrial State Inevitable Economic Journal 78,372-392, June. ● Mitchell, M., T. Pulvino and E. Stafford.( 2004) Price Pressure Around Mergers, Journal of Finance 58. ● Moeller, S.B., F.P. Schlingemann and R.M. Stulz.(2004) Wealth Destruction on a Massive Scale A Study of Acquiring-Firm Returns in the Recent Merger Wave, Journal of Finance 58, 146-159. ● Mueller, D.C. (1969) A Theory of Conglomerate Mergers, Quarterly Journal of Economics 83,643-659. Mueller, D.C. (1993 ). Mergers: Theory and Evidence,In Mergers, Markets and ● Public Policy. Giuliano Mussati (Ed.), Kluwer: Dordrecht, the Netherlands, ● Mueller, D.C. and Raunig Burkhard (1999) Heterogeneities Within Industries And Structure-Performance Models, Review of Industrial Organization 15, 303-320. ● Perry, M.K.(1989) Vertical Integration: Determinants And Effects, In R. Schmalensee and R.D. Willig Eds., Handbook of Industrial Organization, Volume I. Netherlands, Amsterdam: Elsevier Science Publishers B. V. Phillips P.C.B. and P. Perron. (1988) Testing for a Unit Root in Time Series Regression, Biometrica 75, 335-346. The PP test is now included in several software packages. ● Pindyck, Robert S. (1976) International Comparisons Of The Residential Demand For energy: a preliminary analysis, Working Paper, Massachusetts Institute of Technology, #MIT EL 76-023WP. ● Porter, M.E. (1987) From Competitive Advantage To Competitive Strategy, Harvard Business Review, 65(3). Rappaport, Alfred.(2002) Creating Shareholder Value: A Guide for Managers and Investors,Free Press.E-book. Ravenscraft, D.S. and Scherer, F.M. (1987a) Profitability of Mergers, International Journal of Industrial Organizations, 17. ● Ravenscraft, D.J., and F. M. Scherer. (1987b) Mergers, Selloffs, and Economic Efficiency ,(Brookings Institution). ● Roll, R. (1986) The Hubris Hypothesis Of Corporate Takeovers, Journal of Business 59, 197-216. ● Scherer, F. M. (1980) Industrial Market Structure and Economic Performance (2nd edition: Rand-McNally). Scherer, F. M. (1999) New Perspectives on Economic Growth and Technological Innovation (Brookings Institution). ● Scherer, F. M. (2002) The Merger Puzzle, in W. Franz et al., eds, Fusionen (Tuebingen: Mohr Siebeck), 1-22. ● Shelton, L.M. (1988) Strategic Business Fit And Corporate Acquisitions, Strategic Management Journal 9, 279-287. ● Young, J.B. (1981) “A conclusive investigation into causation elements of failure in acquisition and merger” in S.J. Lee & R.D. Colman (eds.): Handbook of Merger, Acquisitions and Buyouts. Englewood Cliffes, New Jersey, Prentice Hall. July-October - 2007 Need the Dough 63
Page 1:
IIPM Planman Hyderabad Campus New D
Page 4 and 5:
M A K E W E A L T H W H I L E O T H
Page 6 and 7:
Editor’s Page Dear reader, Prasoo
Page 8 and 9: PANORAMA A“M&A”ZING INDIA 8
Page 10 and 11: PANORAMA The year gone by has seen
Page 12 and 13: PANORAMA MERGERS AND ACQUISITIONS :
Page 14 and 15: PANORAMA the Public Announcement, i
Page 16 and 17: PANORAMA DERIVATIVES A Critical Ass
Page 18 and 19: PANORAMA Competitive impact: This f
Page 20 and 21: GLOBAL PERSPECTIVE A BIG RICH INDIA
Page 22 and 23: PANORAMA a patriarchal system, whic
Page 24 and 25: TRENDS Jet Airways - Air Sahara mer
Page 26 and 27: TRENDS report stated that the gover
Page 28 and 29: TRENDS THE SURGING TSUNAMI - MERGER
Page 30 and 31: TRENDS established giants of the in
Page 32: TRENDS The FII funds inflow for the
Page 35 and 36: MERGERS & ACQUISITIONS The golden b
Page 37 and 38: MERGERS & ACQUISITIONS effect on th
Page 39 and 40: MERGERS & ACQUISITIONS Ltd, tractor
Page 41 and 42: MERGERS & ACQUISITIONS sector worth
Page 43 and 44: MERGERS & ACQUISITIONS Consolida
Page 45 and 46: P LANMAN TECHNOLOGIES KNOWLEDGE . I
Page 47 and 48: MERGERS & ACQUISITIONS Baffled Cons
Page 49 and 50: MERGERS & ACQUISITIONS or unlisted.
Page 51 and 52: MERGERS & ACQUISITIONS company, cou
Page 53 and 54: MERGERS & ACQUISITIONS Introduct
Page 55 and 56: MERGERS & ACQUISITIONS ing, rather
Page 57: MERGERS & ACQUISITIONS capital and
Page 61 and 62: RESEARCH βQ = 0. (12) Finally, a C
Page 63 and 64: RESEARCH Tabel 3 Test of Structural
Page 65 and 66: MERGERS & ACQUISITIONS The Main Ide
Page 67 and 68: MERGERS & ACQUISITIONS D) Multinati
Page 69 and 70: I.T. = Business Growth At Planman T
Page 71 and 72: MERGERS & ACQUISITIONS An abundance
Page 73 and 74: MERGERS & ACQUISITIONS ber 2006, Qa
Page 75 and 76: MERGERS & ACQUISITIONS Kravis Rober
Page 77 and 78: MERGERS & ACQUISITIONS percent abov
Page 79 and 80: MERGERS & ACQUISITIONS The Current
Page 82 and 83: D A R E T O D R E A M : S T R A T E
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