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The Efficiency of EU Merger Control During the Period 1990–2008

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Abstract

The main goal of this paper is to empirically test the function of European merger control in light of the 2004 regulatory reform, which was expected to introduce a more efficient regulatory framework for the assessment of mergers within the EU. We use stock market data to identify cases where there are discrepancies between the European Commission’s decisions compared to market evaluations of the mergers in question. Using the PROBIT model, these cases are further investigated to discover the sources of these discrepancies. In line with previous studies, our results suggest that the discrepancies are caused by procedural and institutional factors. Nevertheless, the regulatory reform introduced in 2004 has, to some extent, enhanced the efficiency of European merger control in the sense that the Commission’s assessments of mergers under the new regulation are more consistent with the market evaluations. We found that the probability of an anti-competitive deal being cleared decreases significantly under the new regulatory framework. Nevertheless, the occurrence of unnecessary remedies has not decreased as the result of the new merger control system. To the authors’ best knowledge, this paper is the first study using stock market data to evaluate the recent reform of European merger control.

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Bibliographic Info

Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 61 (2011)
Issue (Month): 3 (July)
Pages: 252-276

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Handle: RePEc:fau:fauart:v:61:y:2011:i:3:p:252-276

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Keywords: merger control; European Union; political economy; regulatory reform; PROBIT model;

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  1. Bergman, Mats A. & Jakobsson, Maria & Razo, Carlos, 2005. "An econometric analysis of the European Commission's merger decisions," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 717-737, December.
  2. Tomaso Duso & Damien J. Neven & Lars-Hendrik Röller, 2002. "The Political Economy of European Merger Control: Evidence using Stock Market Data," CIG Working Papers FS IV 02-34, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  3. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  4. Johan Lagerlöf & Paul Heidhues, 2002. "On the Desirability of an Efficiency Defense in Merger Control," CIG Working Papers FS IV 02-08, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  5. Damien J. NEVEN & Lars-Hendrik RÖLLER, 2000. "Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.24, Université de Lausanne, Faculté des HEC, DEEP.
  6. Ari Hyytinen & Pekka Ilmakunnas, 2007. "What distinguishes a serial entrepreneur?," Industrial and Corporate Change, Oxford University Press, vol. 16(5), pages 793-821, October.
  7. Kling, Jeffrey R. & Kessler, Ronald C. & Ludwig, Jens & Sanbonmatsu, Lisa & Liebman, Jeffrey B. & Katz, Lawrence & Duncan, Greg J., 2008. "What Can We Learn about Neighborhood Effects from the Moving to Opportunity Experiment?," Scholarly Articles 2766959, Harvard University Department of Economics.
  8. Tomaso Duso & Klaus Gugler & Burcin Yurtoglu, 2005. "EU Merger Remedies: A Preliminary Empirical Assessment," CIG Working Papers SP II 2005-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  9. Tamás Bartus, 2005. "Estimation of marginal effects using margeff," Stata Journal, StataCorp LP, vol. 5(3), pages 309-329, September.
  10. Schwert, G.W., 1994. "Mark-up Pricing in Mergers and Acquisitions," Papers 95-01, Rochester, Business - Financial Research and Policy Studies.
  11. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2000. "Efficiency Gains from Mergers," CIG Working Papers FS IV 00-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  12. Damien Neven, 2002. "Discrepancies Between Markets and Regulators: an Analysis of the First ten Years of EU Merger Control," IHEID Working Papers 10-2002, Economics Section, The Graduate Institute of International Studies.
  13. Cox, Alan J & Portes, Jonathan, 1998. "Mergers in Regulated Industries: The Uses and Abuses of Event Studies," Journal of Regulatory Economics, Springer, vol. 14(3), pages 281-304, November.
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