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Bankruptcy Avoidance as a Motive For Merger*

Published online by Cambridge University Press:  06 April 2009

Ronald E. Shrieves  and
Donald L. Stevens
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Extract

The phenomenal growth in corporate merger activity of the 1960s revived interest in the motives and effects relating to corporate mergers. In recent years, many theories for explaining mergers have been discussed and tested in the literature of finance, law, and economics. Various authors have argued that motives for merger include increased market power [15, 21, 23], achievement of operating or managerial scale economies [2, 8], diversification [6], tax reduction [19], growth maximization [14, 16], and bankruptcy avoidance [7, 10, 12, 13]. The bankruptcy avoidance motive is perhaps the most recently articulated of all merger motives, and perhaps the only one for which no systematic attempts at empirical validation have been forthcoming.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 3 , September 1979 , pp. 501 - 515
Copyright
Copyright © School of Business Administration, University of Washington 1979

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References

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