Quest for Efficiency: Assessing the Impact of Mergers on Performance in the US Telecommunications Industry
61 Pages Posted: 1 Sep 2007
Date Written: March 15, 2007
We evaluate the impact of the various mergers of the local exchange companies that took place between 1988 and 2001 on several measures of performance of the firms that have undergone the mergers. Our analysis reveals that relative cash flows decrease after mergers, the pattern of accompanying sales growth is ambiguous and driven by increased market presence while the impact of mergers on the measures of efficiency and synergy are negative. If the efficiency motive is primary in influencing merger approval, then the past mergers approved have led to inefficiencies and welfare losses for the American consumer and the mergers of communication common carriers have not been in the public interest. On the other hand, given the inefficiency outcomes views that the quiet life, hubris and a quest for possible market power have motivated the mergers cannot be discarded.
Keywords: dynamic panel data analysis, efficiency, financial performance, local exchange carriers, mergers and acquisitions, operational performance, US telecommunications industry
JEL Classification: l96
Suggested Citation: Suggested Citation