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Mergers in Regulated Industries: The Uses and Abuses of Event Studies

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  • Cox, Alan J
  • Portes, Jonathan
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    Abstract

    Merging utilities are frequently required to share the economic benefits of a merger with ratepayers. These benefits are often measured using stock price movements at the time of the merger announcement. While event studies of this sort can be a powerful and appropriate tool, improper application and interpretation can lead to misleading conclusions. In this paper, we review the basic event study approach to merger evaluation and discuss some of the complicating factors. We describe both flawed and correctly done event studies submitted in the merger application of SBC Communications and Pacific Telesis and some additional case studies. Copyright 1998 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 14 (1998)
    Issue (Month): 3 (November)
    Pages: 281-304

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    Handle: RePEc:kap:regeco:v:14:y:1998:i:3:p:281-304

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    Web page: http://www.springerlink.com/link.asp?id=100298

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    Cited by:
    1. John J. García & Francesc Trillas, 2011. "Control corporativo y riqueza de los accionistas en el sector eléctrico europeo (2000-2007)," DOCUMENTOS DE TRABAJO CIEF 010660, UNIVERSIDAD EAFIT.
    2. Banal-Estanol, Albert & Heidhues, Paul & Nitsche, Rainer & Seldeslachts, Jo, 2009. "Screening and Merger Activity," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 270, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Panagiotis Fotis & Michael Polemis & Nikolaos Zevgolis, 2011. "Robust Event Studies for Derogation from Suspension of Concentrations in Greece during the Period 1995–2008," Journal of Industry, Competition and Trade, Springer, vol. 11(1), pages 67-89, March.
    4. Warell, Linda, 2007. "A horizontal merger in the iron ore industry: An event study approach," Resources Policy, Elsevier, vol. 32(4), pages 191-204, December.
    5. Frederick Warren-Boulton & Serdar Dalkir, 2001. "Staples and Office Depot: An Event-Probability Case Study," Review of Industrial Organization, Springer, vol. 19(4), pages 467-479, December.
    6. Buckland, Roger & Fraser, Patricia, 2002. "The scale and patterns of abnormal returns to equity investment in UK electricity distribution," Global Finance Journal, Elsevier, vol. 13(1), pages 39-62.
    7. Goran Serdareviæ & Petr Teplý, 2011. "The Efficiency of EU Merger Control During the Period 1990–2008," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(3), pages 252-276, July.
    8. John J. García & Francesc Trillas, 2013. "European energy industry shocks, corporate control and firms' value," DOCUMENTOS DE TRABAJO CIEF 010928, UNIVERSIDAD EAFIT.

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