{"title":"Mergers, firm size, and volatility in a granular economy","authors":"Jackie M.L. Chan , Han (Steffan) Qi","doi":"10.1016/j.red.2024.101254","DOIUrl":null,"url":null,"abstract":"<div><div>We study the firm dynamics associated with mergers and acquisitions (M&A) and their implications at the micro and macro levels. Our paper presents three main findings: (i) mergers generate a more fat-tailed firm-size distribution, thereby amplifying granular fluctuations and increasing aggregate volatility; (ii) the impact of mergers depends on strategic market power and endogenous markups; and (iii) under endogenous markups, we provide a novel characterization of the firm size-volatility relationship in which volatility declines disproportionately with size. We build a quantitative model of domestic horizontal mergers and find a sizeable impact of mergers on aggregate volatility using counterfactual analysis.</div></div>","PeriodicalId":47890,"journal":{"name":"Review of Economic Dynamics","volume":"55 ","pages":"Article 101254"},"PeriodicalIF":2.3000,"publicationDate":"2024-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Economic Dynamics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1094202524000437","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
We study the firm dynamics associated with mergers and acquisitions (M&A) and their implications at the micro and macro levels. Our paper presents three main findings: (i) mergers generate a more fat-tailed firm-size distribution, thereby amplifying granular fluctuations and increasing aggregate volatility; (ii) the impact of mergers depends on strategic market power and endogenous markups; and (iii) under endogenous markups, we provide a novel characterization of the firm size-volatility relationship in which volatility declines disproportionately with size. We build a quantitative model of domestic horizontal mergers and find a sizeable impact of mergers on aggregate volatility using counterfactual analysis.
期刊介绍：
Review of Economic Dynamics publishes meritorious original contributions to dynamic economics. The scope of the journal is intended to be broad and to reflect the view of the Society for Economic Dynamics that the field of economics is unified by the scientific approach to economics. We will publish contributions in any area of economics provided they meet the highest standards of scientific research.
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