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When to buy or sell in supply chains with the presence of mergers

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  • Wang, Xunxiao
  • Wu, Chongfeng
  • Xu, Weidong

Abstract

This paper investigates the timing of buying and selling in supply chains with mergers consisting of suppliers and manufacturers whose costs and revenues are uncertain, respectively. Based on the real option theory, we recognize the option value of waiting for a better trading timing in a setting that mergers occur in suppliers or manufactures. Moreover, our findings enable us to capture more accurately such characteristics of mergers as synergy effects and diversification effects, which play key roles in firm׳s capital investment decisions. Furthermore, the results display the characteristics of whether merger waves are clustered by industries, captured by correlation coefficient ρ. Finally, in order to address the impact of mergers on the trading timing, we, in the light of the situation before and after the merges, perform comparative analysis on strategies of the buying and selling, which clearly shows the differences of trading actions in the two scenarios.

Suggested Citation

  • Wang, Xunxiao & Wu, Chongfeng & Xu, Weidong, 2015. "When to buy or sell in supply chains with the presence of mergers," International Journal of Production Economics, Elsevier, vol. 163(C), pages 137-145.
    • Handle: RePEc:eee:proeco:v:163:y:2015:i:c:p:137-145
    DOI: 10.1016/j.ijpe.2015.02.022
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    Cited by:

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    2. Yunlong Yu & Tiaojun Xiao & Zhangwei Feng, 2020. "Price and cold-chain service decisions versus integration in a fresh agri-product supply chain with competing retailers," Annals of Operations Research, Springer, vol. 287(1), pages 465-493, April.
    3. Yuan, Zhennan & Chen, Frank Y. & Yan, Xiaoming & Yu, Yugang, 2020. "Operational implications of yield uncertainty in mergers and acquisitions," International Journal of Production Economics, Elsevier, vol. 219(C), pages 248-258.

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