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Did Tough Antitrust Enforcement Cause the Diversification of American Corporations?

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  • Matsusaka, John G.

Abstract

This paper investigates the hypothesis that tough antitrust enforcement in the 1960s led firms to engage in diversification programs by preventing them from growing within their own industries. If true, diversification should have occurred more often when large firms merged than when small firms merged because small mergers were less likely to have received antitrust attention. Such a pattern is not observed in a sample of 549 acquisitions from 1968—diversification was equally common in large and small mergers. Survey evidence shows that diversification movements occurred in other industrialized nations where there was a loose antitrust environment. Both pieces of evidence suggest that antitrust played a minor role in the diversification movement.

Suggested Citation

  • Matsusaka, John G., 1996. "Did Tough Antitrust Enforcement Cause the Diversification of American Corporations?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(2), pages 283-294, June.
    • Handle: RePEc:cup:jfinqa:v:31:y:1996:i:02:p:283-294_00
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    Cited by:

    1. Antonio De Vito & Martin Jacob & Dirk Schindler & Guosong Xu, 2023. "How Do Corporate Tax Hikes Affect Investment Allocation within Multinationals?," CESifo Working Paper Series 10272, CESifo.
    2. Klein, Peter G, 2001. "Were the Acquisitive Conglomerates Inefficient?," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 745-761, Winter.
    3. Garfinkel, Jon A. & Hankins, Kristine Watson, 2011. "The role of risk management in mergers and merger waves," Journal of Financial Economics, Elsevier, vol. 101(3), pages 515-532, September.
    4. Boyan Jovanovic & Peter L. Rousseau, 2001. "Stock Markets in the New Economy," Vanderbilt University Department of Economics Working Papers 0118, Vanderbilt University Department of Economics.
    5. Martynova, M. & Renneboog, L.D.R., 2005. "Takeover Waves : Triggers, Performance and Motives," Discussion Paper 2005-029, Tilburg University, Tilburg Law and Economic Center.
    6. Deng, Ping & Yang, Monica, 2015. "Cross-border mergers and acquisitions by emerging market firms: A comparative investigation," International Business Review, Elsevier, vol. 24(1), pages 157-172.
    7. Yasser Alhenawi & Martha L. Stilwell, 2019. "Toward a complete definition of relatedness in merger and acquisition transactions," Review of Quantitative Finance and Accounting, Springer, vol. 53(2), pages 351-396, August.
    8. Nils Herger & Steve McCorriston, 2014. "Horizontal, Vertical, and Conglomerate FDI: Evidence from Cross Border Acquisitions," Working Papers 14.02, Swiss National Bank, Study Center Gerzensee.
    9. Nils Herger & Steve McCorriston, 2014. "Horizontal, Vertical, and Conglomerate Cross Border Acquisitions," Discussion Papers 1402, University of Exeter, Department of Economics.
    10. Mitchell Berlin, 1999. "Jack of all trades? Product diversification in nonfinancial firms," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 15-29.
    11. Martynova, M., 2006. "The market for corporate control and corporate governance regulation in Europe," Other publications TiSEM 8651e281-4914-41f2-ac14-1, Tilburg University, School of Economics and Management.
    12. Jing Zhou & Yunwen Jiang & On Kit Tam & Wei Lan & Silin Ye, 2021. "Success in completing cross‐border acquisitions by emerging market firms: What matters?," The World Economy, Wiley Blackwell, vol. 44(7), pages 2128-2163, July.

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