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Stock market perceptions of the motives for mergers in cases reviewed by the UK competition authorities: an empirical analysis

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  • Malcolm Arnold

    (Cranfield School of Management, Cranfield University, Cranfield, Bedfordshire, UK)

  • David Parker

    (Centre for Research in Economics and Finance, Cranfield School of Management, Cranfield University, Cranfield, Bedfordshire, UK)

Abstract

A number of studies have considered the motivation of managers to follow a merger strategy. However, as far as we are aware none has looked at the influence of competition regulation on merger motives using stock market data and event study techniques. Data drawn from 63 merger cases in the UK between 1989 and 2003 are examined for the stock market's perceptions of what motivated managers to pursue their initial merger bid. The findings suggest that the Synergy and Hubris dominate as motivations for mergers and that, unintentionally, competition policy may help to reduce the number of mergers motivated by Managerialism. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1445
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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 30 (2009)
Issue (Month): 4 ()
Pages: 211-233

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Handle: RePEc:wly:mgtdec:v:30:y:2009:i:4:p:211-233

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, Elsevier, vol. 21(1), pages 3-40, May.
  2. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 59(2), pages 197-216, April.
  3. Desai, Ashay & Kroll, Mark & Wright, Peter, 2005. "Outside board monitoring and the economic outcomes of acquisitions: a test of the substitution hypothesis," Journal of Business Research, Elsevier, Elsevier, vol. 58(7), pages 926-934, July.
  4. Grinstein, Yaniv & Hribar, Paul, 2004. "CEO compensation and incentives: Evidence from M&A bonuses," Journal of Financial Economics, Elsevier, Elsevier, vol. 73(1), pages 119-143, July.
  5. Stillman, Robert, 1983. "Examining antitrust policy towards horizontal mergers," Journal of Financial Economics, Elsevier, Elsevier, vol. 11(1-4), pages 225-240, April.
  6. Brady, Una & M. Feinberg, Robert, 2000. "An examination of stock-price effects of EU merger control policy," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 18(6), pages 885-900, August.
  7. Salinger, Michael, 1992. "Standard Errors in Event Studies," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 27(01), pages 39-53, March.
  8. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, Elsevier, vol. 11(1-4), pages 241-273, April.
  9. Seyhun, H Nejat, 1990. "Do Bidder Managers Knowingly Pay Too Much for Target Firms?," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 63(4), pages 439-64, October.
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