The Economic Impact of Merger Control Legislation

Carletti, Elena; Hartmann, Philipp; Ongena, Steven

doi:10.2139/ssrn.1095684

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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

See all articles by Elena Carletti

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; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

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: Suggested Citation

Carletti, Elena and Hartmann, Philipp and Ongena, Steven R. G., 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