The Economics of Corporate Governance and Mergers
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The Economics of Corporate Governance and Mergers

Edited by Klaus Gugler and B. Burcin Yurtoglu

This book provides an insightful view of major issues in the economics of corporate governance (CG) and mergers. It presents a systematic update on the developments in the two fields during the last decade, as well as highlighting the neglected topics in CG research, such as the role of boards, CG and public interest and the relation of CG to mergers. Two important conclusions can be drawn from this book: the first is that corporate governance systems that better align shareholders’ and managers’ interests lead to better corporate performance; second, there is an important relationship between CG structures and the quality of firm decision-making, one of the most important being the decision to merge or take over another firm.
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Chapter 7: Mergers: An Overview

Stephen Martin


Stephen Martin I am the very model of a modern merger-wavicle, I have dimensions horizontal, vertical, and conglomerical, I know the kings of industry, and I quote the fights historical From U.S. Steel to DaimlerChrysler, in order divestiturical; I’m very well acquainted, too, with matters mathematical, I understand equations, both the simple and quadratical, About the CAP-M I’m teeming with a lot o’ news, With many cheerful facts about random walks on the loose. (With apologies to Gilbert and Sullivan) 1 INTRODUCTION The singular of data, Stigler among others is supposed to have said, is anecdote. By the same token, the plural of anecdote is data. At this writing, business history has been good enough to furnish us with five anecdotes about mergers in developed economies, in the form of the five merger waves recorded between the turn of the nineteenth century and the turn of the twentieth century. It is possible to take the view that each merger wave is sufficiently different from the others to require individual study (Markham, 1955, p. 154). Yet one may hope that (like waves in the ocean) although each merger wave is in some aspects unique, merger waves as a class have enough elements in common to permit generalization about mergers as a phenomenon. That is the approach taken here. In section 2, I review each of the five merger waves of the last hundred-plus years. In sections 3 and 4 I distill the things economists have had to say about...

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