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Sources of Gains in Corporate Mergers: Refined Tests from a Neglected Industry

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  • Becher, David A.
  • Mulherin, J. Harold
  • Walkling, Ralph A.

Abstract

Our work provides refined tests of the source of merger gains in a neglected industry: utilities. Utilities offer fertile ground for analysis of traditional theories: synergy, collusion, hubris, and anticipation. Utility mergers create wealth for the combined firm, consistent with both the synergy and collusion hypotheses. To distinguish between these hypotheses, we study rival stock returns across dimensions related to collusion: deregulation, geography, and horizontal and withdrawn deals. We also find that the impact of mergers on consumer prices is consistent with synergy rather than collusion. Analysis of industry rivals that become targets also rejects collusion and is consistent with anticipation.

Suggested Citation

  • Becher, David A. & Mulherin, J. Harold & Walkling, Ralph A., 2012. "Sources of Gains in Corporate Mergers: Refined Tests from a Neglected Industry," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(01), pages 57-89, April.
  • Handle: RePEc:cup:jfinqa:v:47:y:2012:i:01:p:57-89_00
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    1. repec:eee:enepol:v:107:y:2017:i:c:p:258-277 is not listed on IDEAS
    2. Ovtchinnikov, Alexei V., 2013. "Merger waves following industry deregulation," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 51-76.
    3. Aktas, Nihat & de Bodt, Eric & Roll, Richard, 2013. "MicroHoo: Deal failure, industry rivalry, and sources of overbidding," Journal of Corporate Finance, Elsevier, vol. 19(C), pages 20-35.
    4. Darren Filson, Saman Olfati, Fatos Radoniqi, . "Evaluating Mergers in the Presence of Dynamic Competition Using Impacts on Rivals," Journal of Law and Economics, University of Chicago Press, vol. 58(4).
    5. Fangming Xu & Huainan Zhao, 2013. "Three-Way Takeovers," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 36(1), pages 67-90, January.
    6. Evgenii Monastyrenko, 2016. "Cross-Border M&As and Eco-Environmental Performance of European Energy Utilities," FIW Working Paper series 169, FIW.
    7. Mario Fischer, 2015. "Challenging the payment effect in bank-financed takeovers," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 26(4), pages 347-376, October.
    8. Hong Zhu & Qi Zhu, 2016. "Mergers and acquisitions by Chinese firms: A review and comparison with other mergers and acquisitions research in the leading journals," Asia Pacific Journal of Management, Springer, vol. 33(4), pages 1107-1149, December.
    9. repec:oup:rcorpf:v:6:y:2017:i:2:p:174-233. is not listed on IDEAS
    10. repec:eee:jebusi:v:94:y:2017:i:c:p:15-31 is not listed on IDEAS
    11. repec:eee:corfin:v:46:y:2017:i:c:p:51-76 is not listed on IDEAS
    12. Chen Lin & Thomas Schmid & Michael S. Weisbach, 2017. "Price Risk, Production Flexibility, and Liquidity Management: Evidence from Electricity Generating Firms," NBER Working Papers 23434, National Bureau of Economic Research, Inc.

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