Stock markets versus activities of mergers and acquisitions

Different from most of the previous literature which used single country data to examine the causality between stock prices and mergers and acquisitions (M&A) activity, the present paper employs thirty-year data of six OECD countries to examine the wavelet coherency and phase difference, and illustrate the dynamic relationship between the two variables. Our results can extend those of past studies, and show that most of the time the correlations between stock markets and M&A activities are insignificant, with the few significant cases occurring at a short time scale, and the directions of correlations are unstable. Additionally, the lead-lag relationships between them are also unstable. During the period of 1990-2005 there were significant coherences between stock prices and M&A activities at the two- to four-year scale in the USA and Canada, showing that the two markets may have a close relationship in the medium term. Finally, the co-movements of M&A activities in these six countries mostly occurred at a short time scale, and the co-movements between the US and Canada and between the US and the UK were more significant at the medium term. The M&A activities occurring in these three countries may influence each other because of their similar cultural and economic situations.