This paper is the first in a series of articles that look at the practical benefits of economics/finance literature to the world of business and policymakers and critically examines whether there is any relationship between academic thought and business or policy application. In this article, I review some key studies of mergers and acquisitions that are representative for this field of study and assess their practical value for making business or policy decisions. I conclude that while this literature does provide a reasonable aggregate of what the markets are doing, they form no basis whatsoever upon which judgments are made about acquisitions or mergers and they certainly are of little or no value when it comes to the strategic issues that are essential to the management. Consequently, this academic literature adds very little to our knowledge of how each specific case is to be handled. More specifically, I find very few papers from the world of economics/finance that are actually able to suggest how business combinations can be integrated post-merger, which is what seems to be of greatest value to business managers. This area has largely been left to strategy consultants and a handful of applied (business) economists.

Before critically reviewing the academic literature on mergers and acquisitions, I shall argue that academic finance/economics has systematically neglected the implications of the nature and limitations of economics as a social science. This is an important reason why academic economic models systematically fail to account for real-world phenomena, which in turn has led to the quite common situation where the empirical results of similar studies, like the M&A studies assessed in this paper, have very wide range of values, without a convincing explanation why this is so. To put it differently, the empirical content of economic theories is typically very low but economists usually act as if this is not the case.