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Mergers, Investment Decisions and Internal Organisation

  • Albert Banal-Estaño
  • Inés Macho-Stadler
  • Jo Seldeslachts

We analyse the effects of investment decisions and firms’ internal organisation on the efficiency and stability of horizontal mergers. In our framework synergies are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effectively realised. Moreover, the paper offers a possible explanation for merger failures. ZUSAMMENFASSUNG - (Fusionen, Investitionsentscheidungen und unternehmensinterne Organisation) Wir analysieren die Auswirkungen von Investitionsentscheidungen und internen Organisationsstrukturen auf die Effizienz und Stabilität von horizontalen Firmenzusammenschlüssen. In unserer Untersuchung sind Synergien endogen und es können interne Konflikte in dem fusionierten Unternehmen auftreten. Es zeigt sich, dass "stabile" Fusionen häufig nicht zu mehr Effizienz, sondern sogar zu Effizienzverlusten führen können. Da solche Firmenzusammenschlüsse zu einer geringeren Wohlfahrt führen, sollte der Regulierer nicht ungeprüft annehmen, dass potentielle Wohlfahrtsgewinne auch immer tatsächlich erreicht werden. Außerdem bietet das Papier eine mögliche Erklärung für das Scheitern von Fusionen.

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Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number SP II 2004-13.

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Length: 53 pages
Date of creation: Dec 2004
Date of revision:
Publication status: Forthcoming in the International Journal of Industrial Organization under the title "Endogenous Mergers and Endogenous Efficiency Gains: The Efficiency Defence Revisited."
Handle: RePEc:wzb:wzebiv:spii2004-13
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