TY  - JOUR
AU  - Hubbard,R. Glenn
AU  - Palia,Darius
TI  - A Re-Examination of the Conglomerate Merger Wave in the 1960s: An Internal Capital Markets View
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6539
PY  - 1998
Y2  - April 1998
UR  - http://www.nber.org/papers/w6539
L1  - http://www.nber.org/papers/w6539.pdf
N1  - Author contact info:
R. Glenn Hubbard
Graduate School of Business
Columbia University, 101 Uris Hall
3022 Broadway
New York, NY  10027
Tel: 212/854-3493
Fax: 212/864-6184
E-Mail: rgh1@columbia.edu, ws2187@columbia.edu

Darius Palia
Thomas A. Renyi Chair in Banking
Department of Finance & Economics
Rutgers Business School
Room 1142, 1 Washington Park
Newark, NJ 07102
Tel: 973/353-5981
Fax: 973/353-1233
E-Mail: dpalia@rci.rutgers.edu
AB  - 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.
ER  -