Banal-Estañol, Albert; Heidhues, Paul; Nitsche, Rainer; … - 2006
Merger activity is intense during economic booms and subdued during recessions. This paper provides a non …-financial explanation for this observable pattern. We construct a model in which the target - by setting the takeover price - screens the … out relatively "bad fit" acquirers, leading to a hike in merger activity. Although positive economic shocks produce …