A RE-EXAMINATION OF EVENT STUDIES APPLIED TO CHALLENGED HORIZONTAL MERGERS
No hay miniatura disponible
Fecha
Autores
Título de la revista
ISSN de la revista
Título del volumen
Editor
Resumen
Descripción
A growing body of empirical studies have been interpreted as
support for a laissez-faire policy towards mergers. These
"event studies" examine the reaction of stock market prices of
firms that announce an agreement to merge. The type ~f reaction
reveals whether a merger is motivated by a desire for market
power or purely to improve market efficiency.
In this paper, a version of the capital asset pricing model
(CAPM) is applied to determine if abnormal returns are earned by
rivals of 22 pairs of firms whose attempted horizontal mergers
were challenged by the federal antitrust agencies. At most
eight, and possibly only five, of the cases were found to be
motivated by efficiency in seeking merger, and at most six, and
possibly only one, were motivated by market power; the rest were
inconclusive.
The event-study technique is highly flawed for the study of
business-regulation effects. Numerous unrealistic assumptions,
inappropriate data constraints, and questionable interpretations
hamper .the application of this technique to policy analysis.