Although most of the research in merger and acquisition indicate insignificant or negative acquisition returns to acquiring firms, studies in merger waves contend that the acquisition position within a wave could significantly influence the consequences. Specifically, early moving acquirers within merger waves can gain from acquisitions. However, to the extent of my knowledge, none of the extant studies focused on investigating the influence of the acquisition position on the non-integrated rival firms as well as firms along the supply chain. This study aims not only to fill this gap, but also examine whether the effects of positioning within a wave on rival, supplier, and customer return are different between horizontal and vertical integrations.
After identifying industry merger waves and acquisition positions using the data from the SDC Mergers and Acquisitions database, horizontal and vertical integrations as well as rival, supplier and customer industries are classified by using the commodity flows between each pair of input-output (IO) industries from the Use table of Benchmark Input-Output Accounts. Afterwards, the event study methodology is performed using market return data from the CRSP. Cross-sectional analysis are conducted to investigate a curvilinear relation between the acquisition positions and the wealth of rivals, suppliers, and customers, as well as the influences of horizontal and vertical acquisition positions.
The results indicate that the decisions to participate in an industry merger wave by an acquirer can propagate the effects through the other nonintegrated firms competing in the same industry as well as firms along the supply chain. Specifically, the statistically significant curvilinear relationships between the acquisition positions within an industry merger wave and the wealth of rivals, main supplier, and main customers are reported only in the full sample and subsample of vertical merger and acquisition. Particularly, the results disclose a statistically significant relationship in a U shaped pattern between the acquisition position and the wealth of rivals. For main suppliers and customers, the results depict the statistically significant influences of the acquisition positions on the wealth of suppliers and customers in an inverted U-shaped pattern.

Abrahamson, E., & Rosenkopf, L. (1993). Institutional and competitive bandwagons: Using mathematical modeling as a tool to explore innovation diffusion. Academy of Management Review, 18(3), 487-517.
Ahern, K. R. (2012). Bargaining power and industry dependence in mergers. Journal of Financial Economics, 103(3), 530-550.
Ahern, K. R., & Harford, J. (2014). The importance of industry links in merger waves. The Journal of Finance, 69(2), 527-576.
Akben-Selcuk, E., & Altiok-Yilmaz, A. (2011). The impact of mergers and acquisitions on acquirer performance: Evidence from Turkey. Business and Economics Journal, 22, 1-8.
Andrade, G., & Stafford, E. (2004). Investigating the economic role of mergers. Journal of Corporate Finance, 10(1), 1-36.
Asimakopoulos, I., & Athanasoglou, P. P. (2013). Revisiting the merger and acquisition performance of European banks. International Review of Financial Analysis, 29, 237-249.
Auster, E. R., & Sirower, M. L. (2002). The dynamics of merger and acquisition waves: A three-stage conceptual framework with implications for practice. The Journal of Applied Behavioral Science, 38(2), 216-244.
Becker, M. J., & Thomas, S. (2008). The spillover effects of changes in industry concentration. Unpublished working paper. University of Pittsburgh. Pittsburgh, PA.
Bernile, G., & Lyandres, E. (2010, March). Merger synergies along the supply chain. Paper presented at the European Winter Finance Summit, Saalbach Hinterglemm, Salzburg, Austria.
Bhattacharyya, S., & Nain, A. (2011). Horizontal acquisitions and buying power: A product market analysis. Journal of Financial Economics, 99(1), 97-115.
Bradley, M., Desai, A., & Kim, E. H. (1988). Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms. Journal of Financial Economics, 21(1), 3-40.
Brauer, M. F., & Wiersema, M. F. (2012). Industry divestiture waves: How a firm's position influences investor returns. Academy of Management Journal, 55(6), 1472-1492.
Brealey, R. A., Myers, S. C., Allen, F., & Mohanty, P. (2012). Principles of corporate finance. New York: McGraw-Hill Education.
Carow, K., Heron, R., & Saxton, T. (2004). Do early birds get the returns? An empirical investigation of early‐mover advantages in acquisitions. Strategic Management Journal, 25(6), 563-585.
Chatterjee, S. (1986). Types of synergy and economic value: The impact of acquisitions on merging and rival firms. Strategic Management Journal, 7(2), 119-139.
Chen, M.-J., SU, K.-H., & Tsai, W. (2007). Competitive tension: The awareness-motivation-capability perspective. Academy of Management Journal, 50(1), 101-118.
Chen, Y. (2001). On vertical mergers and their competitive effects. The RAND Journal of Economics, 32(4 ), 667-685.
Clougherty, J. A., & Duso, T. (2009). The impact of horizontal mergers on rivals: Gains to being left outside a merger. Journal of Management Studies, 46(8), 1365-1395.
Clougherty, J. A., & Duso, T. (2011). Using rival effects to identify synergies and improve merger typologies. Strategic Organization, 9(4), 310-335.
Custódio, C., & Metzger, D. (2013). How do CEOs matter? The effect of industry expertise on acquisition returns. The Review of Financial Studies, 26(8), 2008-2047.
DeFond, M. L., Konchitchki, Y., McMullin, J. L., & O'Leary, D. E. (2010, August). Does superior knowledge management increase shareholder value. Paper presented at the American Accounting Association Annual Meeting, San Francisco, USA.
Devos, E., Kadapakkam, P.-R., & Krishnamurthy, S. (2008). How do mergers create value? A comparison of taxes, market power, and efficiency improvements as explanations for synergies. The Review of Financial Studies, 22(3), 1179-1211.
Doukas, J. A., & Zhang, W. (2016). Envy‐motivated merger waves. European Financial Management, 22(1), 63-119.
Duchin, R., & Schmidt, B. (2013). Riding the merger wave: Uncertainty, reduced monitoring, and bad acquisitions. Journal of Financial Economics, 107(1), 69-88.
Eckbo, B. E. (1983). Horizontal mergers, collusion, and stockholder wealth. Journal of Financial Economics, 11(1), 241-273.
Eckbo, B. E. (1985). Mergers and the market concentration doctrine: Evidence from the capital market. Journal of Business, 58(1), 325-349.
Eckbo, B. E. (1992). Mergers and the value of antitrust deterrence. The Journal of Finance, 47(3), 1005-1029.
Erel, I., Liao, R. C., & Weisbach, M. S. (2012). Determinants of cross-border mergers and acquisitions. The Journal of Finance, 67(3), 1045-1082.
Fan, J. P., & Goyal, V. K. (2006). On the patterns and wealth effects of vertical mergers. The Journal of Business, 79(2), 877-902.
Fan, J. P., & Lang, L. H. (2000). The measurement of relatedness: An application to corporate diversification. The Journal of Business, 73(4), 629-660.
Fee, C. E., & Thomas, S. (2004). Sources of gains in horizontal mergers: Evidence from customer, supplier, and rival firms. Journal of Financial Economics, 74(3), 423-460.
Fiol, C. M., & O'Connor, E. J. (2003). Waking up! Mindfulness in the face of bandwagons. Academy of Management Review, 28(1), 54-70.
Garfinkel, J. A., & Hankins, K. W. (2011). The role of risk management in mergers and merger waves. Journal of Financial Economics, 101(3), 515-532.
Gaughan, P. A. (2010). Mergers, acquisitions, and corporate restructurings. New Jersey: John Wiley & Sons.
Gaur, A. S., Malhotra, S., & Zhu, P. (2013). Acquisition announcements and stock market valuations of acquiring firms' rivals: A test of the growth probability hypothesis in China. Strategic Management Journal, 34(2), 215-232.
Golbe, D. L., & White, L. J. (1988). A time-series analysis of mergers and acquisitions in the US economy. Corporate takeovers: Causes and consequences (pp. 265-310). Illinios: University of Chicago Press.
Gort, M. (1969). An economic disturbance theory of mergers. The Quarterly Journal of Economics, 83(4), 624-642.
Gorton, G., Kahl, M., & Rosen, R. (2005). Eat or be eaten: A theory of mergers and merger waves. (NBER Working Paper No. 11364): National Bureau of Economic Research
Graham, J. R. (1999). Herding among investment newsletters: Theory and evidence. The Journal of Finance, 54(1), 237-268.
Gubbi, S. R., Aulakh, P. S., Ray, S., Sarkar, M., & Chittoor, R. (2010). Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms. Journal of International Business Studies, 41(3), 397-418.
Haleblian, J., Devers, C. E., McNamara, G., Carpenter, M. A., & Davison, R. B. (2009). Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of Management, 35(3), 469-502.
Haleblian, J. J., McNamara, G., Kolev, K., & Dykes, B. J. (2012). Exploring firm characteristics that differentiate leaders from followers in industry merger waves: A competitive dynamics perspective. Strategic Management Journal, 33(9), 1037-1052.
Harford, J. (1999). Corporate cash reserves and acquisitions. The Journal of Finance, 54(6), 1969-1997.
Harford, J. (2003). Efficient and distortional components to industry merger waves. Paper presented at the AFA 2004 San Diego Meetings, San Diego, CA.
Harford, J. (2005). What drives merger waves? Journal of Financial Economics, 77(3), 529-560.
Hart, O., Tirole, J., Carlton, D. W., & Williamson, O. E. (1990). Vertical integration and market foreclosure. Brookings Papers on Economic Activity. Microeconomics, 1990(1990), 205-286.
Hayward, M. L., & Hambrick, D. C. (1997). Explaining the premiums paid for large acquisitions: Evidence of CEO hubris. Administrative Science Quarterly, 42(1), 103-127.
Horn, H., & Wolinsky, A. (1988). Bilateral monopolies and incentives for merger. The RAND Journal of Economics, 19(3), 408-419.
Hu, M., & Huynh, P. N. (2015). How do cross-border mergers and acquisitions affect firm's management and stakeholders? Corporate Finance Review, 20(2), 22.
Inderst, R., & Wey, C. (2003). Bargaining, mergers, and technology choice in bilaterally oligopolistic industries. The RAND Journal of Economics, 34(1), 1-19.
Jain, P., Rani, N., & Yadav, S. (2012). Impact of mergers and acquisitions on returns to shareholders of acquiring firms: Indian economy in perspective. Journal of Financial Management & Analysis, 25(1), 1-24.
Jain, P., & Sunderman, M. A. (2014). Stock price movement around the merger announcements: Insider trading or market anticipation? Managerial Finance, 40(8), 821-843.
Jensen, M. C. (1986). Agency cost of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323-329.
Jovanovic, B., & Rousseau, P. L. (2002). The Q-theory of mergers. (NBER Working Paper No. 8740): National Bureau of Economic Research
Kale, J. R., Kini, O., & Ryan, H. E. (2003). Financial advisors and shareholder wealth gains in corporate takeovers. Journal of Financial and Quantitative Analysis, 38(3), 475-501.
King, D. R., Dalton, D. R., Daily, C. M., & Covin, J. G. (2004). Meta‐analyses of post‐acquisition performance: Indications of unidentified moderators. Strategic Management Journal, 25(2), 187-200.
Lang, L. H., Stulz, R., & Walkling, R. A. (1991). A test of the free cash flow hypothesis: The case of bidder returns. Journal of Financial Economics, 29(2), 315-335.
Lehn, K. M., & Zhao, M. (2006). CEO turnover after acquisitions: Are bad bidders fired? The Journal of Finance, 61(4), 1759-1811.
Liargovas, P., & Repousis, S. (2011). The impact of mergers and acquisitions on the performance of the Greek banking sector: An event study approach. International Journal of Economics and Finance, 3(2), 89-100.
Lin, C., Officer, M. S., & Zou, H. (2011). Directors' and officers' liability insurance and acquisition outcomes. Journal of Financial Economics, 102(3), 507-525.
Malmendier, U., & Tate, G. (2008). Who makes acquisitions? CEO overconfidence and the market's reaction. Journal of Financial Economics, 89(1), 20-43.
Martynova, M., & Renneboog, L. (2008). A century of corporate takeovers: What have we learned and where do we stand? Journal of Banking & Finance, 32(10), 2148-2177.
McNamara, G. M., Haleblian, J. J., & Dykes, B. J. (2008). The performance implications of participating in an acquisition wave: Early mover advantages, bandwagon effects, and the moderating influence of industry characteristics and acquirer tactics. Academy of Management Journal, 51(1), 113-130.
McWilliams, A., & Siegel, D. (1997). Event studies in management research: Theoretical and empirical issues. Academy of Management Journal, 40(3), 626-657.
Milbourn, T. T., Boot, A. W., & Thakor, A. V. (1999). Megamergers and expanded scope: Theories of bank size and activity diversity. Journal of Banking & Finance, 23(2), 195-214.
Mitchell, M. L., & Mulherin, J. H. (1996). The impact of industry shocks on takeover and restructuring activity. Journal of Financial Economics, 41(2), 193-229.
Nain, A., & Wang, Y. (2016). The product market impact of minority stake acquisitions. Management Science, 64(2), 825-844.
Nocke, V., & White, L. (2007). Do vertical mergers facilitate upstream collusion? The American Economic Review, 97(4), 1321-1339.
Ordover, J. A., Saloner, G., & Salop, S. C. (1990). Equilibrium vertical foreclosure. The American Economic Review, 80(1), 127-142.
Park, M., & Town, R. (2014). Industry shock expectations, interindustry linkages, and merger waves: Evidence from the hospital industry. Journal of Economics & Management Strategy, 23(3), 548-567.
Parola, H. R., Ellis, K. M., & Golden, P. (2015). Performance effects of top management team gender diversity during the merger and acquisition process. Management Decision, 53(1), 57-74.
Persons, J. C., & Warther, V. A. (1997). Boom and bust patterns in the adoption of financial innovations. Review of Financial Studies, 10(4), 939-967.
Polonchek, J. A., & Sushka, M. E. (1987). The impact of financial and economic conditions on aggregate merger activity. Managerial and Decision Economics, 8(2), 113-119.
Rhodes‐Kropf, M., & Robinson, D. T. (2008). The market for mergers and the boundaries of the firm. The Journal of Finance, 63(3), 1169-1211.
Rhodes‐Kropf, M., & Viswanathan, S. (2004). Market valuation and merger waves. The Journal of Finance, 59(6), 2685-2718.
Rhodes–Kropf, M., Robinson, D. T., & Viswanathan, S. (2005). Valuation waves and merger activity: The empirical evidence. Journal of Financial Economics, 77(3), 561-603.
Rodrigues, V. (2014). Restructuring and merger waves. International Journal of Economic Theory, 10(4), 355-369.
Roll, R. (1986). The hubris hypothesis of corporate takeovers. The Journal of Business, 59(2), 197-216.
Salinger, M. A. (1988). Vertical mergers and market foreclosure. The Quarterly Journal of Economics, 103(2), 345-356.
Scharfstein, D. S., & Stein, J. C. (1990). Herd behavior and investment. The American Economic Review, 80(3), 465-479.
Schumpeter, J. A. (2013). Capitalism, Socialism, and Democracy. Oxford: Routledge.
Shahrur, H. (2005). Industry structure and horizontal takeovers: Analysis of wealth effects on rivals, suppliers, and corporate customers. Journal of Financial Economics, 76(1), 61-98.
Shenoy, J. (2012). An examination of the efficiency, foreclosure, and collusion rationales for vertical takeovers. Management Science, 58(8), 1482-1501.
Shleifer, A., & Vishny, R. W. (1991). Takeovers in the'60s and the'80s: Evidence and implications. Strategic Management Journal, 12(S2), 51-59.
Shleifer, A., & Vishny, R. W. (2003). Stock market driven acquisitions. Journal of Financial Economics, 70(3), 295-311.
Song, M. H., & Walkling, R. A. (2000). Abnormal returns to rivals of acquisition targets: A test of the 'acquisition probability hypothesis'. Journal of Financial Economics, 55(2), 143-171.
Stearns, L. B., & Allan, K. D. (1996). Economic behavior in institutional environments: The corporate merger wave of the 1980s. American Sociological Review, 61(4), 699-718.
Stigler, G. J. (1964). A theory of oligopoly. The Journal of Political Economy, 72(1), 44-61.
Sudarsanam, P. S., & Sudarsanam, P. S. (1995). The essence of mergers and acquisitions (Vol. 230). London: Prentice Hall.
Vazirani, N. (2012). Mergers and acquisitions performance evaluation-A literature review. SIES Journal of Management, 8(2), 37-42.
Weston, J. F., & Weaver, S. C. (2004). Mergers & Acquisition. Ohio: McGraw-Hill Professional Book Group.
Yao, Z., & Zhou, W. (2015). Vertical or horizontal: Endogenous merger waves in vertically related industries. The BE Journal of Economic Analysis & Policy, 15(3), 1237-1262.
Zhang, J. (1997). Strategic delay and the onset of investment cascades. The RAND Journal of Economics, 28(1), 188-205.
Zhu, J., Boyaci, T., & Ray, S. (2016). Effects of upstream and downstream mergers on supply chain profitability. European Journal of Operational Research, 249(1), 131-143.