Quest for Efficiency: Assessing the Impact of Mergers on Performance in the US Telecommunications Industry

61 Pages Posted: 1 Sep 2007

See all articles by Sumit K. Majumdar

Sumit K. Majumdar

University of Texas at Dallas - Department of Information Systems & Operations Management

Rabih Moussawi

Villanova University - Department of Finance; University of Pennsylvania - The Wharton School

Ulku Yaylacicegi

University of North Carolina (UNC) at Wilmington

Date Written: March 15, 2007

Abstract

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

Majumdar, Sumit K. and Moussawi, Rabih and Yaylacicegi, Ulku, Quest for Efficiency: Assessing the Impact of Mergers on Performance in the US Telecommunications Industry (March 15, 2007). Available at SSRN: https://ssrn.com/abstract=1008601 or http://dx.doi.org/10.2139/ssrn.1008601

Sumit K. Majumdar (Contact Author)

University of Texas at Dallas - Department of Information Systems & Operations Management ( email )

SM 33
800 W Campbell
Richardson, TX 75080
United States
972-883-4786 (Phone)
972-883-4841 (Fax)

Rabih Moussawi

Villanova University - Department of Finance ( email )

800 E Lancaster Ave
Bartley Hall, 2051
Villanova, PA 19085
United States

HOME PAGE: http://www.homepage.villanova.edu/rabih.moussawi

University of Pennsylvania - The Wharton School ( email )

United States

Ulku Yaylacicegi

University of North Carolina (UNC) at Wilmington ( email )

601 South College Road
Wilmington, NC 28403
United States

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