Effect of Research and Development and Market Concentration on Merger Outcomes -- An Event Study of U.S. Horizontal Mergers
AbstractThis study examines the pattern of abnormal returns for merging companies and rivals to determine investor expectations regarding the impact of horizontal mergers challenged by the government. Prior studies have indicated that the government may have challenged efficiency-enhancing mergers as evidenced by the pattern of abnormal returns to rivals during merger events. This study examines those patterns using challenged mergers from 1997 to 2007, and it adds to the literature by assessing the effect that R&D intensity and change in HHI have on the returns to rivals and merging firms. The paper finds that the pattern of abnormal returns is a result of the different effects that antitrust complaints and merger outcomes have on rivals based on R&D intensity and change in industry concentration. This finding suggests that the government may have been properly vigilant in challenging mergers over the past 10 years in basic industries that have high levels of market concentration. However, it also may have allowed collusive mergers to proceed in R and D intensive industries.
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Bibliographic InfoPaper provided by American University, Department of Economics in its series Working Papers with number 2009-16 JEL classification: L10, L40.
Date of creation: Aug 2009
Date of revision:
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Web page: http://www.american.edu/cas/economics/
mergers; Research and Development; Strategic Protection; market concentration; event study;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-05 (All new papers)
- NEP-BEC-2009-12-05 (Business Economics)
- NEP-INO-2009-12-05 (Innovation)
- NEP-TID-2009-12-05 (Technology & Industrial Dynamics)
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