Abstract
This paper proposes an empirical method to identify the firm-level propagation of volatilities sourcing from endogenous events and tracks its paths in production networks. We investigate how mergers and acquisitions (M&As) spill over from the target firms to their peers (i.e., firms that share common suppliers/customers with the targets). After M&As, peers of the target firm experience an average increase in sales by 1.4%. Decomposition of the propagation reveals its trajectory: the common supplier channel carries most of the propagation. While the downstream channel is negligible since it is attenuated by the elasticity of substitution between target firm and its peers.
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