Mergers and the Value of Antitrust Deterrence

36 Pages Posted: 12 Nov 2008

See all articles by B. Espen Eckbo

B. Espen Eckbo

Tuck School of Business at Dartmouth; European Corporate Governance Institute (ECGI)

Date Written: 1992


While the U.S. has pursued a vigorous antitrust policy towards horizontal mergers over the past four decades, mergers in Canada have until recently been permitted to take place in a virtually unrestricted antitrust environment. The absence of an antitrust overhang in Canada presents an interesting opportunity to test the conjecture that the rigid market share and concentration criteria of the U.S. policy effectively deters a significant number of potentially collusive mergers. The effective deterrence hypothesis implies that the probability of a horizontal merger being anticompetitive is higher in Canada than in the U.S.. However, parameters in cross-sectional regressions reject the market power hypothesis on samples of both U.S. and Canadian mergers. Judging from the Canadian evidence, there simply isn't much to deter.

Keywords: Mergers, antitrust, deterrence, market power, merger for monopoly, industry valuation effect, industry concentration, market concentration doctrine, collusive merger, efficiency

JEL Classification: G25, D21, D43, D61, G28, G34, G38, K21, L11, L13, L22, L44

Suggested Citation

Eckbo, B. Espen, Mergers and the Value of Antitrust Deterrence (1992). Journal of Finance, Vol. 47, pp. 1005-1029, 1992, Available at SSRN:

B. Espen Eckbo (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
603-646-3953 (Phone)
603-646-3805 (Fax)


European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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