Mergers, Investment Decisions and Internal Organisation
Universitat Pompeu Fabra - Department of Economics and Business (DEB); City University London - Department of Economics
Universidad Autonoma de Barcelona; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
University of Amsterdam; Tinbergen Institute
CESifo Working Paper Series No. 944; WZB, Markets and Political Economy Working Paper No. SP II 2004-13
We analyse the effects of investment decisions and firms' internal organisation on the efficiency and stability of horizontal mergers. In our framework synergies are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effectively realised. Moreover, the paper offers a possible explanation for merger failures.
Number of Pages in PDF File: 41
Keywords: Horizontal Mergers, Investment, Efficiency Gains, Internal Conflict
JEL Classification: L22, D43working papers series
Date posted: June 16, 2003
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