The Economic Impact of Merger Control Legislation
Bocconi University - Department of Finance; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)
European Central Bank (ECB); Centre for Economic Policy Research (CEPR) - International Macroeconomics
University of Zurich - Department of Banking and Finance; Swiss Finance Institute
January 13, 2015
FDIC Center for Financial Research Working Paper No. 2008-12
TILEC Discussion Paper No. 2008-006
We investigate the impact of legislative reforms in merger control legislation in nineteen industrial countries between 1987 and 2004. We find that strengthening merger control decreases the stock prices of non-financial firms, while increasing those of banks. Cross sectional regressions show that the discretion embedded in the supervisory control of bank mergers is a major determinant of the positive bank stock returns. One explanation is that merger control introduces “checks and balances” that mitigates the potential abuse and wasteful enforcement of supervisory control in the banking sector.
Number of Pages in PDF File: 51
Keywords: mergers and acquisitions, competition policy, legal institutions, financial regulation
JEL Classification: G21, G28, D4
Date posted: February 20, 2008 ; Last revised: January 13, 2015
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