Mergers during the first and second phase of globalization [Elektronische Ressource] : success, insider trading, and the role of regulation / submitted by Gerhard Kling

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Informations

• Publié par: eberhard_karls_universitat_tubingen
• Publié le: 01 janvier 2004
• Nombre de lectures: 3
• Langue: English
• Poids de l'ouvrage: 6 Mo

Extrait

Mergers During the First and Second Phase of Globalization:
Success, Insider Trading, and the Role of Regulation


Inaugural Thesis
To Obtain the Doctoral Degree
of the Faculty of Economics
Eberhard-Karls-Universität Tübingen
Germany


Submitted by

Gerhard Kling
Born in Munich


2004 II





















Dean: Professor Dr. rer. pol. Renate Hecker
First Referee: Professor Dr. pub. oec. Jörg Baten
Second Referee: Professor Dr. rer. pol. Werner Neus
thDay of the Disputation: 28 May 2004
III
Gerhard Kling


Mergers During the First and Second Phase of Globalization:
Success, Insider Trading, and the Role of Regulation



“I find it difficult to think of economists and economic historians as separate
animals. Their interests are fundamentally the same. The job of the economist is
to explain how the economy works; the job of the economic historian is to
explain how it worked in the past.”

A. K. Cairncross IV
Acknowledgements
First of all, I take the opportunity to thank my advisor Jörg Baten for his steady support
during `periods of suffering and doom´ that are typical for a dissertation project. He also
encouraged me to attend conferences and present my research to an international audience.
Even more important, he gave me the freedom to develop my own thoughts, make my own
mistakes, and gain experience.
My thesis is based on five working papers – but they all contribute to one single story
that highlights the success of mergers in Germany in different periods of time. Two of these
working papers were presented at international conferences; hence, I want to thank for the
many comments I received. My paper entitled `The impact of merger announcements on stock
prices: The rejection of the merger paradox for German companies´ was presented at the
annual meeting of the Business and Economic Historical Society in Memphis 2003. Lynne
Pierson Doti, as my discussant and chair of the session, and Jari Eloranta gave me some very
thuseful comments. This paper was also presented at the 5 European Historical Economics
Society Conference in Madrid 2003. Thus, I want to thank Stefano Battilossi, Albrecht
Ritschl, and Joachim Voth for the challenging debates. In the general discussion, Stephen
Broadberry asked whether mergers were successful in the long-run; now, I am able to
respond, and my fifth chapter is dedicated to this task. My paper on the `Disclosure of
mergers without regulatory restrictions: Comparing insider-trading in the year 1908 and 2000
in Germany´ was invited for presentation at the NBER conference on Developing and
Sustaining Financial Markets, 1820-2000, which took place 2003 in Boston. I thank Marc
Weidenmier for his excellent comments as well as Lance Davis, Larry Neal, and Eugene
White who organized the conference and contributed remarkably to the high quality of
discussions. I had also the chance to participate in the research seminar for PhD students
organized by the German Finance Association (DGF) (2003 in Mainz) and in the Third
Summer School in Institutions, Economics, and History: Credit Networks and Economic
thDevelopment (2003 in Venice). On 26 January 2004, I presented the joint paper that I wrote
together with Markus Baltzer entitled `Resiliency of the pre-World War I German stock
exchange: Evidence from a panel vector autoregression´ at the Workshop in Economic History
at the Humboldt University in Berlin. Furthermore, I took the chance to present my research
several times at the Economic Workshop at the University of Tübingen. Consequently, I
received many comments and suggestions to further improve my work. For their active role in
the discussions, Werner Neus and Joachim Grammig deserve special thank. V
The scholarship from the German Research Foundation (DFG) supported my research
considerably and mitigated the financial burden imposed by attending international
conferences. I also want to thank the German Finance Association (DGF), the department of
economic history of the Humboldt-Universität, and the National Bureau of Economic
Research (NBER) for their financial support.
Furthermore, I thank the program committee that selected my paper on the `Disclosure
of mergers´ for the annual meeting of the Economic History Society. Due to the `self-
sacrificing´ work of my co-author Markus Baltzer our paper entitled `Resiliency of the pre-
World War I German stock exchange: Evidence from a panel vector autoregression´ attracts
international interest; accordingly, we will present our paper at the European Social Science
History Conference 2004 in Berlin. Even more noteworthy, this paper was also accepted for
thpresentation at the 5 World Congress of Cliometrics that will take place in Venice 2004.
The encouraging atmosphere in the graduate school and in our research group in
economic history facilitated my work considerably. Henceforth, I thank all members of the
graduate school and our research group for their friendship and steady support. I should
emphasize, especially, the excellent comments due to Alexander Moradi and Aravinda
Meera’s advice with regard to language, spelling, style, and other `horrible´ things.

VI
Preface
Before you start reading, I want to highlight some basic convictions I have with regard to
language, cited literature, and presenting problems inherent with data sets and empirical
methods. I strongly believe in these convictions and I am convinced that they contribute to the
quality of research.
The primary goal of scientific writing is to maintain clarity. Studying the books
written by Day (1995, 1998) and Strunk and White (1999) helped to come closer to this goal –
but it stays a difficult challenge. To avoid too wordy expressions, Day (1995, 1998) preferred
to use active voice; thereby, `I´ and `We´ are interchangeably – but uncommon for German
ears. By the way, I also learnt how to use semicolons in English – albeit I have still no idea
how to use semicolons in German. Nevertheless, I hope that my language is simple enough to
convey the sophisticated content.
Unfortunately, economic history is an extremely broad area of research that produces
tons of literature every year; hence, I restricted myself to essential contributions published in
refereed journals or outstanding edited volumes. Even worse, my research also includes topics
in finance and econometrics which increases the related literature further. Accordingly, I cite
only important sources that contribute to my research considerably. Generally, I focus on the
`working paper style´ which avoids too lengthy reviews of literature. In contrast, my own data
sets, methods, and results are of primary interest. Nevertheless, it is valuable to stress to what
extent my research contributes to the existing strands of the literature. Of course, the typical
literature in economic history usually contains hundreds of references; however the following
quote that is due to William C. Roberts expresses my conviction best. “Manuscripts
containing innumerable references are more likely a sign of insecurity than a mark of
scholarship”.
Of course, empirical researchers often want to produce significant results, and only
these results are usually published; however, having no results also contributes to science.
Henceforth, I strongly believe that highlighting the limitations of data sets and methods is a
crucial part of empirical research. For instance, I am very proud that I fail to detect a long-
term impact of mergers on share prices and dividends. Thomas A. Edison put it in the
following manner: “Results! Why, man, I have gotten a lot of results. I know several thousand
things that won’t work.”
VII
Often used symbols and abbreviations
P Stock price t
E Error term it
2σ Variance of the error term e which is equal to the residual of the CMR model e
µ Mean return of stock I i
R Observed daily returns it
A Matrix that contains for all stocks i all observed daily returns for the whole
estimation period
L Length of the estimation period
*ε Abnormal return it
τ or τ Indicate a specific point in time; thereby, m ≤ n m n
ˆC(τ ; τ) Vector of cumulated abnormal returns m n
∗ε Portfolio weighted abnormal return t
C(τ ;τ) Cumulated portfolio weighted abnormal return m n
D Dividends it
N Nominal capital it
b Estimated parameter vector for t; thereby, one uses only the information t-1
available at t-1
m Executed merger it
∆z Vector that contains the first difference in share prices and in dividends it
inf Inflation rate at time t t
Σ Coefficient matrix for lag j of the VAR in reduced form j
gVector that contains unexpected shocks in inflation and growth rates t

CMR Constant mean return model
MM Market model
CUSUM Cumulated sum of residuals
GARCH Generalized autoregressive conditional heteroscedasticity model
ARCH Autoregressive conditional heteroscedasticity model
ARIMA Autoreg