The Determinants of Conglomerate Mergers

Abstract

As the number of conglomerate acquisitions greatly increased in the late 1960's,1 a plethora of explanations for the movement was offered by economists.2 However, there has been little empirical evidence explaining why the merger pattern activity has varied so greatly across manufacturing industries. Thus, while Gort and Hogarty (10) observe, "The stock of literature on mergers has in recent years grown even faster than the number of mergers, though the stock of knowledge on this subject reveals little growth," Kamerschen (13) concludes that the empirical evidence seems "scanty, desultory, and unre fined." The purpose of this paper is to fill a gap in the literature on mergers by providing a cross-section study of the determinants of conglomerate acquisitions. In particular, the relationship between the number of conglomer ate acquisitions in 121 three-digit standard industrial classifications (SIC) industries and the most important market structure characteristics is examined to infer whether or not the