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August 26, 2008

Comments

Tom P

Great post.

So you don't think the efficient allocation of capital is a benefit of stockmarkets then?

chris

Thanks. I suppose it could be that the static inefficiency of the stock market actually helps promote GDP growth inadvertently. For example, the tech bubble of the late 90s - whilst a grotesque mispricing - actually encouraged investment in broadband capacity, which has long-run benefits.
Daniel Gross makes this sort of argument in his book, Pop!.

modernity

Harry's Place has been attacked, and is functioning from a backup blog, http://jennadelich.blogspot.com/

Your support in this matter would be appreciated.

commentator

Nah. A huge amount of restructuring and efficiency increases take place following mergers and acquisitions, which are facilitated by the stock market.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1213125

commentator

Nah. A huge amount of restructuring and efficiency increases take place following mergers and acquisitions, which are facilitated by the stock market.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1213125

reason

commentator...
You are not understanding the point. Mergers COST and the stock market evidence is that the COST exceeds the benefit. Afterall, the same effect could be acchieved via organic growth if a dominant firm drives other firms out of business.
Personally, I describe hostile leverage takeovers as the triumph of hubris over experience. It also acts to reduce the variety of management strategies in circulation, thus reducing the information gaining efficiency of capitalism.

reason

If you don't understand my point about information gaining - what I am saying is that mergers and acquisitions mean that management strategies are evaluated by banker prejustice instead of natural selection.

Tom P

I've not looked at this recently but KPMG did a couple of studies a few years back on the value created by M&A for shareholders in the acquirer. They found in the majority of cases that either there was no benefit or value was actually destroyed.

Colonel Robert F. Cunningham

YOU ARE ABSOLUTELY RIGHT!

What NONE of the mouths in either house said was: "The pass-this-national-extortion bill or WE WILL IMMEDIATELY CREATE A DEPRESSION threat actually came from The Fed - which is NOT a government-owned agency.

The rest requires vulgar language as a civil tongue has no adequate words ………..

Colonel Robert F. Cunningham
colrfcunningham@comcast.net
http://www.theakurians.com

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