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Compulsory or Voluntary Pre-merger Notification? Theory and Some Evidence

  • Chongwoo, Choe
  • Shekhar, Chander

We compare the prevailing system of compulsory pre-merger notification with the Australian system of voluntary pre-merger notification. It is shown that, for a non-trivial set of parameter values, a perfect Bayesian equilibrium exists in mixed strategies in which the regulator investigates un-notified mergers with probability less than one and the parties choose notification with probability less than one. Thanks to the signaling opportunity that arises when notification is voluntary, voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties. Some of the theoretical predictions are supported by exploratory empirical tests using merger data from Australia. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the merging parties as well as to the regulator.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13450.

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Date of creation: Feb 2009
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Handle: RePEc:pra:mprapa:13450
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  1. Shahrur, Husayn, 2005. "Industry structure and horizontal takeovers: Analysis of wealth effects on rivals, suppliers, and corporate customers," Journal of Financial Economics, Elsevier, vol. 76(1), pages 61-98, April.
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  12. Philip L. Williams & Graeme Woodbridge, 2004. "Antitrust Merger Policy: Lessons from the Australian Experience," NBER Chapters, in: Governance, Regulation, and Privatization in the Asia-Pacific Region, NBER East Asia Seminar on Economics, Volume 12, pages 35-72 National Bureau of Economic Research, Inc.
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