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Using rival effects to identify synergies and improve merger typologies

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  • Clougherty, Joseph A.
  • Duso, Tomaso

Abstract

The strategy literature has found it difficult to differentiate between collusive and efficiencybased synergies in horizontal merger activity. We propose a theoretically-backed methodological approach to classify mergers that yields more information on merger types and merger effects, and that can, moreover, distinguish between mergers characterized largely by collusion-based synergies and mergers characterized largely by efficiency-based synergies. Crucial to the proposed measurement approach is that it encompasses the impact of merger events not only on merging firms (custom in the literature), but also on non-merging rival firms (novel in the literature). Employing the event-study procedure with stock-market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-American sub-sample) and from the European continent, we demonstrate how the proposed schematic can better clarify the nature of merger activity. --

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Bibliographic Info

Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 25.

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Date of creation: 2011
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Handle: RePEc:zbw:dicedp:25

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Keywords: acquisitions; event-study; mergers; research methods; rivals; synergy;

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References

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  1. Julian Birkinshaw, 2000. "Managing the Post-acquisition Integration Process: How the Human Iintegration and Task Integration Processes Interact to Foster Value Creation," Journal of Management Studies, Wiley Blackwell, Wiley Blackwell, vol. 37, pages 395-425, 05.
  2. Volker Nocke & Lucy White, 2003. "Do Vertical Mergers Facilitate Upstream Collusion?," PIER Working Paper Archive 03-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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  7. Hall, Peter A. & Soskice, David (ed.), 2001. "Varieties of Capitalism: The Institutional Foundations of Comparative Advantage," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199247752, October.
  8. Joseph A. Clougherty & Tomaso Duso, 2008. "The Impact of Horizontal Mergers on Rivals: Gains to Being Left Outside a Merger," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) SP II 2008-17r, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Feb 2009.
  9. Tomaso Duso & Damien J. Neven & Lars-Hendrik Röller, 2007. "The Political Economy of European Merger Control: Evidence using Stock Market Data," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 50, pages 455-489.
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  23. repec:ant:wpaper:1999018 is not listed on IDEAS
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Cited by:
  1. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, De Gruyter, vol. 11(2), pages 1-23, June.
  2. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, Elsevier, vol. 115(1), pages 7-10.
  3. Christin, Clémence, 2011. "Entry deterrence through cooperative R&D over-investment," DICE Discussion Papers, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) 38, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) 37, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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