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The Economic Impact of Merger Control Legislation

FDIC Center for Financial Research Working Paper No. 2008-12

TILEC Discussion Paper No. 2008-006

51 Pages Posted: 20 Feb 2008 Last revised: 13 Jan 2015

Elena Carletti

Bocconi University - Department of Finance; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Philipp Hartmann

European Central Bank (ECB); Centre for Economic Policy Research (CEPR) - International Macroeconomics

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Date Written: January 13, 2015

Abstract

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

Carletti, Elena and Hartmann, Philipp and Ongena, Steven, The Economic Impact of Merger Control Legislation (January 13, 2015). FDIC Center for Financial Research Working Paper No. 2008-12; TILEC Discussion Paper No. 2008-006. Available at SSRN: https://ssrn.com/abstract=1095684 or http://dx.doi.org/10.2139/ssrn.1095684

Elena Carletti

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Philipp Hartmann

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
(49 69) 1344 7356 (Phone)
(49 69) 1344 8553 (Fax)

Centre for Economic Policy Research (CEPR) - International Macroeconomics

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute ( email )

Quartier UNIL-Dorigny, Bâtiment Extranef, # 211
40, Bd du Pont-d'Arve
CH-1015 Lausanne, CH-6900
Switzerland

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