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The Economic Impact of Merger Control Legislation

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  • Carletti, E.
  • Hartmann, P.
  • Ongena, S.

    (Tilburg University, Tilburg Law and Economics Center)

Abstract

We construct a unique dataset of legislative reforms in merger control legislation that occurred in nineteen industrial countries in the period 1987-2004, and investigate the economic impact of these changes on stock prices. In line with the hypothesis that merger control should challenge anticompetitive mergers and thus limit future monopolistic profits, we find that the strengthening of merger control decreases the stock prices of non-financial firms. In contrast, we find that bank stock prices increase. Cross sectional regressions show that the discretion embedded in the supervisory control of bank mergers is a major determinant of the positive bank stock returns. This suggests that merger control is anticipated to create a “separation of powers” and “checks and balances” mechanism in the banking sector that mitigates the potential for abuse and wasteful enforcement of the supervisory control. We provide a case study further supporting this interpretation.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2008-006.

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Date of creation: 2008
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Handle: RePEc:dgr:kubtil:2008006

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Web page: http://www.tilburguniversity.nl/tilec/

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Cited by:
  1. repec:diw:diwfin:diwfin02010 is not listed on IDEAS
  2. Yuliya Demyanyk & Charlotte Ostergaard & Bent E. Sorensen, 2008. "Risk sharing and portfolio allocation in EMU," European Economy - Economic Papers 334, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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