IDEAS home Printed from https://ideas.repec.org/p/wzb/wzebiv/fsiv01-21.html
   My bibliography  Save this paper

The Effects of Mergers: An International Comparison

Author

Listed:
  • Klaus Gugler
  • Dennis C. Mueller
  • B. Burcin Yurtoglu
  • Christine Zulehner

Abstract

This paper analyzes the effects of mergers around the world over the past 15 years. We utilize a large panel of data on mergers to test several hypotheses about mergers. The effects of the mergers are examined by comparing the performance of the merging firms with control groups of nonmerging firms. The comparisons are made on profitability and sales. The results show that mergers on average do result in significant increases in profits, but reduce the sales of the merging firms. Interestingly, these post merger patterns look similar across countries. We also did not find dramatic differences between mergers in the manufacturing and the service sectors, and between domestic and cross-border mergers. Conglomerate mergers decrease sales more than horizontal mergers. By separating mergers into those that increase profits and those that reduce them and by then examining the patterns of sales changes following the mergers, we determine the effects of mergers on efficiency and market power. Our results suggest that those mergers that decrease profits and efficiency account for a large proportion. However, we can also identify mergers that increase profits by either increasing market power or by increasing efficiency. The first conclusion seems to be a more likely explanation for large companies, whereas the latter is likely to be true for small firms. ZUSAMMENFASSUNG - (Die Effekte von Fusionen: Ein internationaler Vergleich) Dieser Artikel analysiert die Effekte von Fusionen, die weltweit über die letzten 15 Jahre stattgefunden haben. Wir vergleichen die Gewinn- und Umsatzentwicklung von fusionierenden Firmen mit der Entwicklung von nicht-fusionierenden Firmen. Die Resultate zeigen, dass Fusionen im Durchschnitt zu signifikant höheren Profiten führen, aber dass die Umsätze im Vergleich zur Kontrollgruppe zurückbleiben. Interessanterweise sind diese Effekte bei Vergleichen zwischen den verschiedenen Ländern, bei einem Vergleich zwischen Industriesektor und Dienstleistungssektor bzw. zwischen nationalen und grenzüberschreitenden Fusionen ziemlich ähnlich. Konglomerate Fusionen reduzieren die Umsätze mehr als horizontale Fusionen. Um die Effekte der Fusionen auf die Marktmacht bzw. die Effizienz zu analysieren, teilen wir zuerst die Fusionen in gewinnsteigernde und gewinnreduzierende Fusionen, um dann die Umsatzentwicklung zu betrachten. Unsere Resultate zeigen, dass ein großer Prozentsatz der Fusionen die Gewinne und die Effizienz reduzieren. Wir können jedoch auch Fusionen identifizieren, die die Gewinne entweder durch Marktmacht- oder Effizienzsteigerungen erhöhen. Die erste Erklärung ist wahrscheinlicher für große Firmen, die zweite für kleine Firmen.

Suggested Citation

  • Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu & Christine Zulehner, 2001. "The Effects of Mergers: An International Comparison," CIG Working Papers FS IV 01-21, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  • Handle: RePEc:wzb:wzebiv:fsiv01-21
    as

    Download full text from publisher

    File URL: http://skylla.wz-berlin.de/pdf/2001/iv01-21.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Scott,John T., 2005. "Purposive Diversification and Economic Performance," Cambridge Books, Cambridge University Press, number 9780521022583.
    2. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
    3. Goldberg, Lawrence G, 1973. "The Effect of Conglomerate Mergers on Competition," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 137-158, April.
    4. Mueller, Dennis C, 1985. "Mergers and Market Share," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 259-267, May.
    5. Suits, Daniel B, 1984. "Dummy Variables: Mechanics v. Interpretation," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 177-180, February.
    6. Dean F. Amel & Stephen A. Rhoades, 1989. "Empirical Evidence on the Motives for Bank Mergers," Eastern Economic Journal, Eastern Economic Association, vol. 15(1), pages 17-27, Jan-Mar.
    7. Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dennis Mueller, 1996. "Antimerger policy in the United States: History and lessons," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(3), pages 229-253, October.
    2. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu & Christine Zulehner, 2001. "Effekte von Fusionen in Kontinentaleuropa und Deutschland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(2), pages 204-213.
    3. Klaus Gugler & Ralph Siebert, 2007. "Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 645-659, November.
    4. Kamerbeek, S.P., 2009. "Merger Performance and Efficiencies in Horizontal Merger Policy in the US and the EU," MPRA Paper 18064, University Library of Munich, Germany.
    5. Rahman, Mahabubur & Lambkin, Mary & Hussain, Dildar, 2016. "Value creation and appropriation following M&A: A data envelopment analysis," Journal of Business Research, Elsevier, vol. 69(12), pages 5628-5635.
    6. Mueller, Dennis C., 1996. "Lessons from the United States's antitrust history," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 415-445, June.
    7. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    8. Tomaso Duso & Lars-Hendrik Röller & Jo Seldeslachts, 2014. "Collusion Through Joint R&D: An Empirical Assessment," The Review of Economics and Statistics, MIT Press, vol. 96(2), pages 349-370, May.
    9. Nicolas Le Pape & Kai Zhao, 2010. "Cost-saving or Cost-enhancing Mergers: the Impact of the Distribution of Roles in Oligopoly," TEPP Working Paper 2010-18, TEPP.
    10. Pulak Mishra, 2018. "Are Mergers and Acquisitions Necessarily Anti-competitive? Empirical Evidence from India’s Manufacturing Sector," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(3), pages 276-307, August.
    11. Jean-Charles Rochet, 2007. "Some economics of horizontal integration in the payments industry," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City.
    12. Amir, Rabah & Diamantoudi, Effrosyni & Xue, Licun, 2009. "Merger performance under uncertain efficiency gains," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 264-273, March.
    13. Harris, Jeremiah & Siebert, Ralph, 2017. "Firm-specific time preferences and postmerger firm performance," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 32-62.
    14. Martynova, M. & Renneboog, L.D.R., 2005. "Takeover Waves : Triggers, Performance and Motives," Discussion Paper 2005-029, Tilburg University, Tilburg Law and Economic Center.
    15. Bhagat, Sanjai & Dong, Ming & Hirshleifer, David & Noah, Robert, 2005. "Do tender offers create value? New methods and evidence," Journal of Financial Economics, Elsevier, vol. 76(1), pages 3-60, April.
    16. Martynova, Marina & Renneboog, Luc, 2008. "A century of corporate takeovers: What have we learned and where do we stand?," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2148-2177, October.
    17. Sven‐Olof Fridolfsson & Johan Stennek, 2010. "Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers," Economica, London School of Economics and Political Science, vol. 77(308), pages 734-750, October.
    18. Thomas Borek & Stefan Buehler & Armin Schmutzler, 2004. "Mergers under Asymmetric Information � Is there a Lemons Problem?," SOI - Working Papers 0408, Socioeconomic Institute - University of Zurich.
    19. James Gaisford & Stefan Lutz, 2007. "A Multi-Product Framework Generating Waves of Mergers and Divestitures," ICER Working Papers 36-2007, ICER - International Centre for Economic Research.
    20. Higgins, Matthew J. & Rodriguez, Daniel, 2006. "The outsourcing of R&D through acquisitions in the pharmaceutical industry," Journal of Financial Economics, Elsevier, vol. 80(2), pages 351-383, May.

    More about this item

    Keywords

    Mergers; Acquisitions; International Comparison;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wzb:wzebiv:fsiv01-21. 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: . General contact details of provider: https://edirc.repec.org/data/cicwzde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jennifer Rontganger (email available below). General contact details of provider: https://edirc.repec.org/data/cicwzde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.