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Channels of Firm Adjustment: Theory and Empirical Evidence

Breinlich, H and Niemann, S (2011) Channels of Firm Adjustment: Theory and Empirical Evidence. UNSPECIFIED. University of Essex, Department of Economics, Economics Discussion Papers 687.

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Abstract

We provide a comprehensive analysis of how firms choose between different expansion and contraction forms, unifying existing approaches from the industrial organization and corporate finance literature. Using novel data covering almost the entire universe of UK firms, we document firms? use of internal adjustment, greenfield investment and mergers and acquisitions (M&As). We describe frequency and aggregate importance of the different channels, and show that their use varies systematically with observable firm characteristics, in particular firm size and the magnitude of adjustment. We also demonstrate that there is positive assortative matching on the UK merger market. Based on these facts, we propose a theoretical framework which accommodates all three adjustment channels in a unified setting, and is able to replicate the adjustment and matching patterns found in the data.

Item Type: Monograph (UNSPECIFIED)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 03 Jul 2012 11:32
Last Modified: 17 Aug 2017 18:11
URI: http://repository.essex.ac.uk/id/eprint/2729

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