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The Political Economy of European Merger Control: Evidence using Stock Market Data

  • Tomaso Duso
  • Damien J. Neven
  • Lars-Hendrik Röller

The objective of this paper is to investigate the determinants of European Union (EU) merger control decisions. We consider a sample of 167 EU mergers between 1990 and 2002 and evaluate their competitive consequences by the reaction of the stock market price of competitors to the merging firms. We then account for the discrepancies between the actual and optimal decisions as indicated by the stock market in terms of the political economy surrounding the cases. Our results suggest that the commission’s decisions cannot be solely accounted for as protecting consumer surplus. The institutional and political environment does matter. As far as influence is concerned, however, our data suggest that the commission’s decisions are not sensitive to firms’ interests. Instead, the evidence suggests that other factors—such as market definition and procedural aspects, as well as country and industry effects—do play a significant role.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/519812
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Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

Volume (Year): 50 (2007)
Issue (Month): ()
Pages: 455-489

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Handle: RePEc:ucp:jlawec:v:50:y:2007:p:455-489
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLE/

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  1. Khemani, R S & Shapiro, Daniel M, 1993. "An Empirical Analysis of Canadian Merger Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 161-77, June.
  2. Röller, Lars-Hendrik & Stennek, Johan & Verboven, Frank, 2000. "Efficiency Gains from Mergers," Working Paper Series 543, Research Institute of Industrial Economics.
  3. Neven, Damien J. & Roller, Lars-Hendrik, 2005. "Consumer surplus vs. welfare standard in a political economy model of merger control," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 829-848, December.
  4. Stillman, Robert, 1983. "Examining antitrust policy towards horizontal mergers," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 225-240, April.
  5. G. William Schwert, 1994. "Mark-Up Pricing in Mergers and Acquisitions," NBER Working Papers 4863, National Bureau of Economic Research, Inc.
  6. Fridolfsson, Sven-Olof & Stennek, Johan, 2000. "Why Event Studies Do Not Detect Anti-Competitive Mergers," Working Paper Series 542, Research Institute of Industrial Economics.
  7. Kaplan, Steven N & Weisbach, Michael S, 1992. " The Success of Acquisitions: Evidence from Divestitures," Journal of Finance, American Finance Association, vol. 47(1), pages 107-38, March.
  8. Salinger, M.A. & Schumann, L., 1988. "Horizontal Mergers And The Market Value Of Rivals: The In Play Effect," Papers fb-_88-03, Columbia - Graduate School of Business.
  9. Malcolm B. Coate, 2002. "A Test of Political Control of the Bureaucracy: The Case of Mergers," Economics and Politics, Wiley Blackwell, vol. 14(1), pages 1-18.
  10. Neven, Damien J., 2001. "How should "protection" be evaluated in Article III GATT disputes?," European Journal of Political Economy, Elsevier, vol. 17(2), pages 421-444, June.
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