Gains to Merging Firms and Their Rivals: Evidence from Canada

24 Pages Posted: 16 May 2011 Last revised: 2 Jun 2012

See all articles by Jean-Yves Filbien

Jean-Yves Filbien

University of Lille I

Maher Kooli

University of Quebec at Montreal (UQAM) - School of Management (ESG)

Date Written: January 5, 2011

Abstract

This study examines how the mergers and acquisitions (M&A) environment affects gains to merging firms and their industry rivals. Using a large sample of Canadian acquisitions announcements from 1994 to 2009, we find that during M&A, the shareholders of Canadian merging firms experience indeed wealth creation. Consistent with the signaling hypothesis, we find that the stock price of acquiring firms’ rivals is more favorable after a dormant period within a specific industry. We also find that in line with the competitive advantage hypothesis, the stock price of target firms’ rivals is negative when the industry has a high degree of concentration.

Keywords: Mergers, Rivals, Market Power, Competitive Advantage, Signaling

JEL Classification: G34

Suggested Citation

Filbien, Jean-Yves and Kooli, Maher, Gains to Merging Firms and Their Rivals: Evidence from Canada (January 5, 2011). International Conference of the French Finance Association (AFFI), May 11-13, 2011, Available at SSRN: https://ssrn.com/abstract=1833441 or http://dx.doi.org/10.2139/ssrn.1833441

Jean-Yves Filbien (Contact Author)

University of Lille I ( email )

104, avenue du peuple Belge
Villeneuve d'Ascq Cedex, 59655
France

Maher Kooli

University of Quebec at Montreal (UQAM) - School of Management (ESG) ( email )

315 rue Sainte-Catherine Est
Montreal, Quebec H3X 3X2
Canada
514 987 3000, 2082 (Phone)
514 987 0422 (Fax)

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