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Mergers, Capital Gains, And Productivity: Evidence From U.S. Telecommunications Mergers

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  • NAKIL SUNG
  • Michael Gort

Abstract

The article examines the effects of two horizontal mergers on the performance of the respective operating companies. The effects of the mergers are investigated by comparing the performance of the merging companies with a control group of nonmerging companies and also the performance of the merging companies before and after merger. The article concludes that mergers did not produce net economies of scale, did not lead to substantial productivity growth or cost reduction, and did not generate significant shareholder wealth effects. It is, to the authors' knowledge, the first study of mergers that combines the analysis of productivity and cost effects, on one hand, with an examination of the effects on financial variables, on the other hand. (JEL L11, L9)

Suggested Citation

  • NAKIL SUNG & Michael Gort, 2006. "Mergers, Capital Gains, And Productivity: Evidence From U.S. Telecommunications Mergers," Contemporary Economic Policy, Western Economic Association International, vol. 24(3), pages 382-394, July.
    • Handle: RePEc:bla:coecpo:v:24:y:2006:i:3:p:382-394
    DOI: 10.1093/cep/byj032
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    References listed on IDEAS

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    1. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, vol. 21(1), pages 3-40, May.
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    3. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March.
    4. Ai, Chunrong & Sappington, David E M, 2002. "The Impact of State Incentive Regulation on the U.S. Telecommunications Industry," Journal of Regulatory Economics, Springer, vol. 22(2), pages 133-159, September.
    5. Gort, Michael & Sung, Nakil, 1999. "Competition and Productivity Growth: The Case of the U.S. Telephone Industry," Economic Inquiry, Western Economic Association International, vol. 37(4), pages 678-691, October.
    6. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    7. Jarrell, Gregg A & Brickley, James A & Netter, Jeffry M, 1988. "The Market for Corporate Control: The Empirical Evidence Since 1980," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 49-68, Winter.
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    Cited by:

    1. Hassan, Ibne & Chidlow, Agnieszka & Romero-Martínez, Ana M., 2016. "Selection, valuation and performance assessment: Are these truly inter-linked within the M&A transactions?," International Business Review, Elsevier, vol. 25(1), pages 255-266.
    2. Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.
    3. Nai Chiek Aik & Taufiq Hassan & Shamsher Mohamad, 2015. "Do Malaysian Horizontal Mergers and Acquisitions Create Value?," Global Business Review, International Management Institute, vol. 16(5_suppl), pages 15-27, October.
    4. Chow, Clement Kong Wing & Tsui, Wai Hong Kan, 2017. "Organizational learning, operating costs and airline consolidation policy in the Chinese airline industry," Journal of Air Transport Management, Elsevier, vol. 63(C), pages 108-118.

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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