The Economic Impact of Merger Control Legislation
FDIC Center for Financial Research Working Paper No. 2008-12
51 Pages Posted: 20 Feb 2008 Last revised: 13 Jan 2015
Date Written: January 13, 2015
We investigate the impact of legislative reforms in merger control legislation in nineteen industrial countries between 1987 and 2004. We find that strengthening merger control decreases the stock prices of non-financial firms, while increasing those of banks. Cross sectional regressions show that the discretion embedded in the supervisory control of bank mergers is a major determinant of the positive bank stock returns. One explanation is that merger control introduces “checks and balances” that mitigates the potential abuse and wasteful enforcement of supervisory control in the banking sector.
Keywords: mergers and acquisitions, competition policy, legal institutions, financial regulation
JEL Classification: G21, G28, D4
Suggested Citation: Suggested Citation