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The Impact of Horizontal Mergers on Rivals: Gains to Being Left Outside a Merger

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  • Joseph A. Clougherty
  • Tomaso Duso

Abstract

It is commonly perceived that firms do not want to be outsiders to a merger between competitor firms. We instead argue that it is beneficial to be a non-merging rival firm to a large horizontal merger. Using a sample of mergers with expert identification of relevant rivals and the event-study methodology, we find rivals generally experience positive abnormal returns at the merger announcement date. We also find that the stock reaction of rivals to merger events is not sensitive to merger waves; hence, 'future acquisition probability' does not drive the positive abnormal returns of rivals. Further, we find the positive (or non-negative) abnormal returns of rivals to be robust when considering heterogeneity in merger and rival characteristics. Copyright (c) Blackwell Publishing Ltd 2009.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Management Studies.

Volume (Year): 46 (2009)
Issue (Month): 8 (December)
Pages: 1365-1395

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Handle: RePEc:bla:jomstd:v:46:y:2009:i:8:p:1365-1395

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Citations

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Cited by:
  1. Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," Working Papers 90/09, University of Southern Denmark, Department of Environmental and Business Economics.
  2. Duso, Tomaso & Guglery, Klaus & Szücs, Florian, 2010. "An Empirical Assessment of the 2004 EU Merger Policy Reform," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 337, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Thomas Bolli & Martin Woerter, 2011. "Competition and R&D Cooperation with Universities and Competitors," KOF Working papers 11-275, KOF Swiss Economic Institute, ETH Zurich.
  4. Dodonova, Anna, 2013. "Preemptive bidding in takeover auctions with externality," Journal of Economics and Business, Elsevier, vol. 69(C), pages 35-44.
  5. Keller, Andreas, 2010. "Competition effects of mergers: An event study of the German electricity market," Energy Policy, Elsevier, vol. 38(9), pages 5264-5271, September.
  6. Gugler, Klaus & Szücs, Florian, 2013. "Spillover effects in oligopolistic markets," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79905, Verein für Socialpolitik / German Economic Association.
  7. Joseph A. Clougherty & Tomaso Duso, 2010. "Using Rival Effects to Identify Synergies and Improve Merger Typologies," CIG Working Papers SP II 2010-13, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  8. Klaus Gugler & Florian Szücs, 2013. "Merger Externalities in Oligopolistic Markets," Discussion Papers of DIW Berlin 1321, DIW Berlin, German Institute for Economic Research.
  9. Stiebale, Joel & Haucap, Justus, 2013. "How Mergers A ffect Innovation: Theory and Evidence," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79831, Verein für Socialpolitik / German Economic Association.

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