On the relationship between mergers and economic activity: Evidence from an optimised hybrid method

A new approach is developed to examine potential causality between merger activity and industrial production. The proposed method combines an information criterion-based approach to lag optimisation with joint maximum likelihood estimation of an autoregressive distributed lag model and GARCH(1,1) specification. Application to UK data provides significant evidence in support of causality between merger activity and industrial production, a result which has been predicted theoretically in the literature but has not received empirical support in earlier research.