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Economic theory and merger behaviour

Cleasby, Maurice Edgar (1983) Economic theory and merger behaviour. PhD thesis, University of Sheffield.

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Abstract

The purpose of the thesis was to seek a general explanation of merger activity. Methodology: A multitude of explanatory theories existed and it was deemed necessary to determine explicitly the criterion to be used in developing a general theory of mergers. An analysis of major categories of merger theory indicated that the analysis of motive is essential to the provision of an adequate explanation. The theory of the managerial firm was chosen for analysis since it is both logically prior to market explanations and richer in motivational possibilities. Difficulties in testing a theory had been exposed by "growth of knowledge" methodologists. It was decided to utilise the propositions for theory testing and development proposed by Lakatos. Two samples of firms were drawn: quoted companies engaged in the supply of consumer goods from 1970 to 1978, and 100 firms engaged in merger activity in 1978 or 1979 and a control group of 50 firms not involved in mergers. Univariate statistical analysis, multiple regression and discriminant analysis were then involved in determining the financial and structural characteristics of firms with respect to merger behaviour. Findings The claim by Lakatos that knowledge could be advanced in a rational and progressive manner was not substantiated. The view that growth and profit are opposing aims of the managerial firm was rejected. Takeover victims could not be identified with failing firms. Shareholders do not benefit from increasing growth and profits proportionately. The theory of the managerial firm (distinguished from that found in the literature) receives some support. Shareholders seem more concerned with security than is compatible with wealth maximisation theory. Merger activity is best understood as a normal form of investment activity. The development of merger theory requires further analysis of the growth strategies of firms in oligopolistic markets under uncertainty.

Item Type: Thesis (PhD)
Academic Units: The University of Sheffield > Faculty of Social Sciences (Sheffield) > Economics (Sheffield)
Identification Number/EthosID: uk.bl.ethos.681738
Depositing User: EThOS Import Sheffield
Date Deposited: 03 Nov 2016 11:55
Last Modified: 03 Nov 2016 11:55
URI: http://etheses.whiterose.ac.uk/id/eprint/15128

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