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The economic impact of merger control legislation

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  • Carletti, Elena
  • Hartmann, Philipp
  • Onega, Steven
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    Abstract

    Based on a unique dataset of legislative changes in industrial countries, we identify events that strengthen the competition control of mergers and acquisitions, analyze their impact on banks and non-financial firms and explain the different reactions observed with specific regulatory characteristics of the banking sector. Covering nineteen countries for the period 1987 to 2004, we find that more competition-oriented merger control increases the stock prices of banks and decreases the stock prices of non-financial firms. Bank targets become more profitable and larger, while those of non-financial firms remain mostly unaffected. A major determinant of the positive bank returns is the degree of opaqueness that characterizes the institutional setup for supervisory bank merger reviews. The legal design of the supervisory control of bank mergers may therefore have important implications for real activity. --

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    Bibliographic Info

    Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2008/04.

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    Date of creation: 2007
    Date of revision:
    Handle: RePEc:zbw:cfswop:200804

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    Related research

    Keywords: Mergers and Acquisitions; Competition Policy; Legal Institutions; Financial Regulation;

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    Cited by:
    1. 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.
    2. Ongena, Steven & Penas, María Fabiana, 2009. "Bondholders' wealth effects in domestic and cross-border bank mergers," Journal of Financial Stability, Elsevier, vol. 5(3), pages 256-271, September.

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