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http://ssrn.com/abstract=2180996
 
 

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The Product Market Impact of Minority Stake Acquisitions


Amrita Nain


University of Iowa - Henry B. Tippie College of Business

Yan Wang


McGill University - Desautels Faculty of Management

September 6, 2013


Abstract:     
We show that partial equity ownership between rival firms has a significant impact on industry competition. Industry-level tests indicate that acquisitions of a minority stake in competing firms’ equity are followed by higher output prices and higher price-cost margins, particularly in industries with high barriers to entry. Stock price reactions of non-participating competitors and of customer firms reflect the increase in industry prices and profit margins. Announcement returns of competitors of the acquirer and target are positive while announcement returns of customer firms are negative. Moreover, the positive (negative) stock-price reaction of competitors (customers) is more pronounced when the acquirer and target are larger firms with a greater market share. These results indicate that equity ownership of rival firms reduces industry competition.

Number of Pages in PDF File: 60

Keywords: partial equity acquisition, product market competition, market power

JEL Classification: G32, G34, L11, L41

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Date posted: November 27, 2012 ; Last revised: September 7, 2013

Suggested Citation

Nain, Amrita and Wang, Yan, The Product Market Impact of Minority Stake Acquisitions (September 6, 2013). Available at SSRN: http://ssrn.com/abstract=2180996 or http://dx.doi.org/10.2139/ssrn.2180996

Contact Information

Amrita Nain (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
Yan Wang
McGill University - Desautels Faculty of Management ( email )
1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
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