NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Re-Examination of the Conglomerate Merger Wave in the 1960s: An Internal Capital Markets View

R. Glenn Hubbard, Darius Palia

NBER Working Paper No. 6539
Issued in April 1998
NBER Program(s):   CF

One possible explanation that bidding firms earned positive abnormal returns in diversifying acquisitions in the 1960s is that internal capital markets were expected to overcome the information deficiencies of the less developed capital markets. Examining 392 bidder firms during the 1960s, we find the highest bidder returns when financially unconstrained' buyers acquire constrained' targets. This result holds while controlling for merger terms and for different proxies used to classify firms facing costly external financing. We also find that bidders generally retain target management, suggesting that management may have provided company-specific operational information, while the bidder provided capital-budgeting expertise.

download in pdf format
   (1179 K)

email paper

This paper is available as PDF (1179 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w6539

Published: Journal of Finance (June 1999).

Users who downloaded this paper also downloaded these:
Holmstrom and Kaplan w8220 Corporate Governance and Merger Activity in the U.S.: Making Sense of the 1980s and 1990s
Stein w5101 Internal Capital Markets and the Competition for Corporate Resources
Gertner, Scharfstein, and Stein w4776 Internal versus External Capital Markets
Lang and Stulz w4376 Tobin's Q, Corporate Diversification and Firm Performance
Scharfstein w6352 The Dark Side of Internal Capital Markets II: Evidence from Diversified Conglomerates
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us