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Compulsory Or Voluntary Pre-Merger Notification? Theory And Some Evidence

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  • Chongwoo Choe
  • Chander Shekhar

Abstract

We study a voluntary pre-merger notification game under asymmetric information and characterize perfect Bayesian equilibria. It is shown that the equilibrium outcomes are similar to those when notification is compulsory. However, thanks to the signaling opportunity that arises when notification is voluntary, voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties. Some of the theoretical predictions are supported by exploratory empirical tests using merger data from Australia where pre-merger notification is voluntary. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the parties as well as to the regulator.

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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 20/08.

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Length: 32 pages
Date of creation: 03 Jul 2008
Date of revision:
Handle: RePEc:mos:moswps:2008-20

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Keywords: Merger regulation; pre-merger notification; abnormal returns.;

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References

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  1. Ivaldi, Marc & Verboven, Frank, 2001. "Quantifying the Effects from Horizontal Mergers in European Competition Policy," CEPR Discussion Papers 2697, C.E.P.R. Discussion Papers.
  2. Fee, C. Edward & Thomas, Shawn, 2004. "Sources of gains in horizontal mergers: evidence from customer, supplier, and rival firms," Journal of Financial Economics, Elsevier, vol. 74(3), pages 423-460, December.
  3. Neven, Damien J & Röller, Lars-Hendrik, 2000. "Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control," CEPR Discussion Papers 2620, C.E.P.R. Discussion Papers.
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  6. Heidhues, Paul & Lagerlöf, Johan N.M., 2003. "On the Desirability of an Efficiency Defense in Merger Control," CEPR Discussion Papers 3841, C.E.P.R. Discussion Papers.
  7. Chander Shekhar & Philip L. Williams, 2004. "Should the Pre-Notification of Mergers Be Compulsory in Australia?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(4), pages 383-390, December.
  8. Allan Fels & Jill Walker, 1994. "Merger Policy and Practice," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(4), pages 96-100.
  9. Brady, Una & M. Feinberg, Robert, 2000. "An examination of stock-price effects of EU merger control policy," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 885-900, August.
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  11. Philip L. Williams & Graeme Woodbridge, 2004. "Antitrust Merger Policy: Lessons from the Australian Experience," NBER Chapters, in: Governance, Regulation, and Privatization in the Asia-Pacific Region, NBER East Asia Seminar on Economics, Volume 12, pages 35-72 National Bureau of Economic Research, Inc.
  12. Verena Hahn, 2000. "Antitrust Enforcement: Abuse Control or Notification?," European Journal of Law and Economics, Springer, vol. 10(1), pages 69-91, July.
  13. Eckbo, B Espen, 1992. " Mergers and the Value of Antitrust Deterrence," Journal of Finance, American Finance Association, vol. 47(3), pages 1005-29, July.
  14. Shahrur, Husayn, 2005. "Industry structure and horizontal takeovers: Analysis of wealth effects on rivals, suppliers, and corporate customers," Journal of Financial Economics, Elsevier, vol. 76(1), pages 61-98, April.
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Cited by:
  1. Gonzalez, Aldo & Benitez, Daniel, 2009. "Optimal pre-merger notification mechanisms - incentives and efficiency of mandatory and voluntary schemes," Policy Research Working Paper Series 4936, The World Bank.
  2. Andreea Cosnita-Langlais & Jean-Philippe Tropeano, 2013. "Ex post or ex ante? On the optimal timing of merger control," EconomiX Working Papers 2013-22, University of Paris West - Nanterre la Défense, EconomiX.

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