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Is the Event Study Methodology Useful for Merger Analysis? A Comparison of Stock Market and Accounting Data

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  • Tomaso Duso
  • Klaus Gugler
  • Burcin Yurtoglu

Abstract

We use a sample of 167 mergers during the period 1990-2002 involving 544 firms either as merging firms or competitors. We contrast a measure of the merger’s profitability based on event studies with one based on accounting data. We find positive and significant correlations between them when using a long window around the announcement date. ZUSAMMENFASSUNG - (Ist die "event study" Methodologie nützlich für die Analyse von Fusionen? Ein Vergleich von Aktienmärkte und Bilanzdaten) Wir analysieren eine Stichprobe von 167 Fusionen, die zwischen 1990 und 2002 stattgefunden haben und welche 544 Unternehmen -entweder als fusionierende Parteien oder als Wettbewerber- involviert haben. Wir vergleichen eine auf "event studies" basierende Rentabilitätsmaß der Fusion zu einer alternativen Maß, die durch Bilanzdaten konstruiert wurde. Wir finden, dass diese zwei maße positiv und signifikant korrelieren besonders wenn wir ein langes Fenster um die Fusionsankündigung in dem "event study" benutzen.

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  • Tomaso Duso & Klaus Gugler & Burcin Yurtoglu, 2006. "Is the Event Study Methodology Useful for Merger Analysis? A Comparison of Stock Market and Accounting Data," CIG Working Papers SP II 2006-19, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  • Handle: RePEc:wzb:wzebiv:spii2006-19
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    References listed on IDEAS

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    Cited by:

    1. Tomaso Duso & Klaus Gugler & Florian Szücs, 2013. "An Empirical Assessment of the 2004 EU Merger Policy Reform," Economic Journal, Royal Economic Society, vol. 123(11), pages 596-619, November.
    2. Warell, Linda, 2007. "A horizontal merger in the iron ore industry: An event study approach," Resources Policy, Elsevier, vol. 32(4), pages 191-204, December.
    3. John J. García & Francesc Trillas, 2013. "European energy industry shocks, corporate control and firms' value," DOCUMENTOS DE TRABAJO CIEF 010928, UNIVERSIDAD EAFIT.
    4. John García & Francesc Trillas, 2011. "Control corporativo y riqueza de los accionistas en el sector eléctrico europeo (2000-2007)," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 13(25), pages 297-319, July-Dece.
    5. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, vol. 55(7), pages 980-1006.
    6. Thomas Giebe & Miyu Lee, 2015. "Competitors In Merger Control: Shall They Be Merely Heard Or Also Listened To?," SFB 649 Discussion Papers SFB649DP2015-011, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    7. David Danz & Dietmar Fehr & Dorothea Kübler, 2012. "Information and beliefs in a repeated normal-form game," Experimental Economics, Springer;Economic Science Association, pages 622-640.
    8. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
    9. Oliver Budzinski, 2011. "Impact Evaluation of Merger Decisions," Working Papers 112/11, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    10. Stiebale, Joel & Haucap, Justus, 2013. "How Mergers A ffect Innovation: Theory and Evidence," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79831, Verein für Socialpolitik / German Economic Association.
    11. John J. García and Francesc Trillas, 2012. "Regulatory Reform and Corporate Control in European Energy Industries," RSCAS Working Papers 2012/30, European University Institute.
    12. Joseph Clougherty & Tomaso Duso, 2015. "Correcting for Self-Selection Based Endogeneity in Management Research: A Review and Empirical Demonstration," Discussion Papers of DIW Berlin 1465, DIW Berlin, German Institute for Economic Research.
    13. Joseph A. Clougherty & Tomaso Duso, 2010. "Using Rival Effects to Identify Synergies and Improve Merger Typologies," CIG Working Papers SP II 2010-13, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    14. 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.
    15. Budzinski, Oliver, 2012. "Empirische Ex-Post Evaluation von wettbewerbspolitischen Entscheidungen: Methodische Anmerkungen," Ilmenau Economics Discussion Papers 69, Ilmenau University of Technology, Institute of Economics.
    16. Anderson, John & Sutherland, Dylan & Severe, Sean, 2015. "An event study of home and host country patent generation in Chinese MNEs undertaking strategic asset acquisitions in developed markets," International Business Review, Elsevier, vol. 24(5), pages 758-771.
    17. Taoufik Bouraoui, 2015. "The effect of reducing quantitative easing on emerging markets," Applied Economics, Taylor & Francis Journals, vol. 47(15), pages 1562-1573, March.

    More about this item

    Keywords

    Mergers; Merger Control; Event Studies; Ex-post Evaluation;

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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