Market Reactions to European Merger Regulation: A Reexamination of the Protectionism Hypothesis

39 Pages Posted: 29 Feb 2012

See all articles by Nihat Aktas

Nihat Aktas

WHU - Otto Beisheim School of Management

Eric de Bodt

NHH-Caltech

Marieke Delanghe

Univ. Lille Nord de France - SKEMA Business School

Richard Roll

California Institute of Technology

Multiple version iconThere are 3 versions of this paper

Date Written: December 5, 2011

Abstract

This article revisits the protectionism hypothesis related to the European merger regulation (EMR). In the 1990s, EMR was biased against foreign acquirers, especially if the deal harmed domestic rivals (i.e., protectionism). At the end of the 20th century and at the beginning of the 21st, the European Commission (EC) has been criticized in the financial press to have blocked mergers between US companies which have been approved by the US authorities. In addition, in 2002, the Court of First Instance overturned three prohibitions by the EC and criticized its economic analysis. These events hastened EMR reform, including amendments introduced in May 2004. Previous empirical studies find evidences of protectionism of the EC in the 1990s. With a sample of 474 merger proposals submitted to the EC during 1990–2007, we show that the EC’s protectionism from the 1990s did not extend into more recent periods. We implement for this an analysis of the probability of intervention of the EC. It turns out that, when domestic rivals are harmed by an operation, the EC does not seem anymore more inclined to intervene when the bidder is non-European. The change of policy toward foreign acquirers seems rooted in Court judgments of 2002 and subsequent regulatory reforms.

Keywords: mergers and acquistions, regulation, protectionism, event study

JEL Classification: G34, G38

Suggested Citation

Aktas, Nihat and de Bodt, Eric and Delanghe, Marieke and Roll, Richard W., Market Reactions to European Merger Regulation: A Reexamination of the Protectionism Hypothesis (December 5, 2011). Available at SSRN: https://ssrn.com/abstract=2013071 or http://dx.doi.org/10.2139/ssrn.2013071

Nihat Aktas

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Eric De Bodt

NHH-Caltech ( email )

18B AVENUE BECHET
Kraainem, 1950
Belgium
+32 475 24 01 69 (Phone)

HOME PAGE: http://www.edebodt.eu

Marieke Delanghe (Contact Author)

Univ. Lille Nord de France - SKEMA Business School ( email )

Avenue Willy Brandt
Lille, 59777
France

Richard W. Roll

California Institute of Technology ( email )

1200 East California Blvd
Mail Code: 228-77
Pasadena, CA 91125
United States
626-395-3890 (Phone)
310-836-3532 (Fax)

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