Transportation networks and competition in the market for corporate control

• 成果类型: Article
• 署名作者: Testoni, Marco
• 署名单位: University of Miami
• 刊物名称: STRATEGIC MANAGEMENT JOURNAL
• ISSN/ISSBN: 0143-2095
• DOI: 10.1002/smj.3577
• 发表日期: 2024
• 页码: 1180-1208
• 关键词: ABNORMAL RETURNS; flights; GEOGRAPHIC DISTANCE; Latent competition; Mergers and Acquisitions

摘要

Research SummaryWhile competition in the market for corporate control determines firms' ability to capture value from acquisitions, there is limited evidence of factors that influence such competition. This study explores whether airline routes intensify competition in this market and affect the target's returns. Targets can become better connected to distant latent acquirers (DLAs), which can increase the targets' bargaining power. Similarly, better connectivity can allow acquirers to reach distant latent targets (DLTs) and therefore increase the acquirers' bargaining power. Examining acquisitions between US public companies during 1980-2018, I find that lower travel time between the target and its DLAs increases the target's returns and the number of competing bids. Instead, the travel time between the acquirer and its DLTs does not play a role.Managerial SummaryIn corporate acquisitions, the competitive threat posed by potential alternative acquirers of the target generally forces the focal acquirer to offer high returns to the target to gain its control. Indeed, these transactions are often not profitable for acquirers. Yet, we know little about what determines the competitive threat faced by acquirers in the market for corporate control. This study shows that the presence of airline routes that reduce the travel time between the target and its latent acquirers increases the target's returns from the deal and the number of competing bids. The study also tests whether lower travel time between the acquirer and its latent targets gives the acquirer more bargaining power vis-a-vis the focal target. However, there is no evidence of this effect.