Effect of Research and Development and Market Concentration on Merger Outcomes -- An Event Study of U.S. Horizontal Mergers
This study examines the pattern of abnormal returns for merging companies and rivals to determine investor expectations regarding the impact of horizontal mergers challenged by the government. Prior studies have indicated that the government may have challenged efficiency-enhancing mergers as evidenced by the pattern of abnormal returns to rivals during merger events. This study examines those patterns using challenged mergers from 1997 to 2007, and it adds to the literature by assessing the effect that R&D intensity and change in HHI have on the returns to rivals and merging firms. The paper finds that the pattern of abnormal returns is a result of the different effects that antitrust complaints and merger outcomes have on rivals based on R&D intensity and change in industry concentration. This finding suggests that the government may have been properly vigilant in challenging mergers over the past 10 years in basic industries that have high levels of market concentration. However, it also may have allowed collusive mergers to proceed in R and D intensive industries.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Cichello & Douglas Lamdin, 2006. "Event Studies and the Analysis of Antitrust," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(2), pages 229-245.
- Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
- Stewart, John F & Harris, Robert S & Carleton, Willard T, 1984. "The Role of Market Structure in Merger Behavior," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 293-312, March.
- Daniel Hosken & John David Simpson, 2001. "Have Supermarket Mergers Raised Prices? An Event Study Analysis," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(3), pages 329-342.
- Eckbo, B Espen & Wier, Peggy, 1985. "Antimerger Policy under the Hart-Scott-Rodino Act: A Reexamination of the Market Power Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 119-149, April.
- Ellert, James C, 1976. "Mergers, Antitrust Law Enforcement and Stockholder Returns," Journal of Finance, American Finance Association, vol. 31(2), pages 715-732, May.
- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
- Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
- Fee, C. Edward & Thomas, Shawn, 2004. "Sources of gains in horizontal mergers: evidence from customer, supplier, and rival firms," Journal of Financial Economics, Elsevier, vol. 74(3), pages 423-460, December.
- Wesley M. Cohen & Richard C. Levin & David C. Mowery, 1987. "Firm Size and R&D Intensity: A Re-Examination," NBER Working Papers 2205, National Bureau of Economic Research, Inc.
- Lamdin, Douglas J., 2001. "Implementing and interpreting event studies of regulatory changes," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 171-183.
When requesting a correction, please mention this item's handle: RePEc:amu:wpaper:2009-16. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Meal)
If references are entirely missing, you can add them using this form.