Using Rival Effects to Identify Synergies and Improve Merger Typologies
German Institute for Economic Research (DIW Berlin); Duesseldorf Institute for Competition Economics (DICE)
Joseph A. Clougherty
University of Illinois at Urbana-Champaign; Centre for Economic Policy Research (CEPR)
September 28, 2010
WZB Discussion Paper SP II No. 2010-13
The strategic management literature has found it difficult to differentiate between collusive and efficiency-based synergies in horizontal merger activity. We propose a schematic to classify mergers that yields more information on merger types and merger effects, and that can, moreover, distinguish between mergers characterized largely by collusion-based synergies and mergers characterized largely by effi-ciency-based synergies. Crucial to the proposed measurement procedure is that it encompasses the impact of merger events not only on merging firms – as is custom – but also on non-merging competitor firms (the rivals). Employing the event-study methodology with stock-market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-Saxon sub-sample) and from the European continent, we demonstrate how the proposed schematic can better clarify the nature of merger activity.
Number of Pages in PDF File: 49
Keywords: acquisitions, event-study, mergers, research methods, rivals, synergy
Date posted: October 30, 2010
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