The influence of industry concentration on merger motives—empirical evidence from machinery industry mergers
AbstractBy linking industrial organization theory and capital market research, we provide empirical evidence that merger motives of firms are influenced by underlying industry concentration. Analyzing wealth effects on target, acquirer and rival firms in the machinery industry, we observe significant different capital market reactions among merger announcements in dependence of underlying industry concentration. suggesting that different takeover motives prevail in fragmented and concentrated industries. In contrast to previous studies, we find besides efficiency motives evidence for monopolistic collusion motives in fragmented industries. Mergers in concentrated industries are primarily motivated to achieve productive efficiency gains. The absence of collusion motives may be an indication for a successful enforcement of antitrust legislation. Our results suggest that the magnitude of the influence of industry concentration in empirical merger motive research may have been previously under-estimated leading to a potential distortion of results. Copyright Springer Science+Business Media, LLC 2014
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Bibliographic InfoArticle provided by Springer in its journal Journal of Economics and Finance.
Volume (Year): 38 (2014)
Issue (Month): 1 (January)
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Web page: http://link.springer.de/link/service/journals/120857/index.htm
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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