The Impact of Mergers on Performance in the US Telecommunications Industry, 1988 to 2001

69 Pages Posted: 31 Jul 2012

See all articles by Sumit K. Majumdar

Sumit K. Majumdar

University of Texas at Dallas - Department of Information Systems & Operations Management

Rabih Moussawi

Villanova University - Department of Finance; University of Pennsylvania - The Wharton School

Ulku Yaylacicegi

University of North Carolina (UNC) at Wilmington

Date Written: August 15, 2006

Abstract

Mergers and acquisitions in the Telecommunications industry have become a distinctive trend of the U.S. economy, with steady consolidation of carriers to head off or take on the competition. While the wealth effects of mergers have been extensively analyzed in prior literature, previous studies fail to correctly relate the causes of such phenomena to ex-post performance. This study elaborates on the consequences of mergers and acquisitions in the telecommunications industry using statistics of communications common carriers for the period 1988 to 2001. Using a dynamic panel data analysis estimation technique - Arellano-Bond (1991) estimation -, which outperforms the event studies methodology used predominantly in prior research, we examine the synergistic effects and success factors of mergers over time with an exhaustive set of financial, operational and technological performance measures that capture profitability, growth, efficiency, productivity, economies of scale and scope, and technology progressiveness. We control for critical periods that constitute structural shift in telecommunications merger and acquisitions activity, and account for many mergers with huge welfare implications. The results of this study will serve to project the future structure of the telecommunications industry. We find significant evidence that mergers are followed by substantial deterioration in profitability and operational performance, in addition to a significant decrease in the investment on new technology.

Suggested Citation

Majumdar, Sumit K. and Moussawi, Rabih and Yaylacicegi, Ulku, The Impact of Mergers on Performance in the US Telecommunications Industry, 1988 to 2001 (August 15, 2006). TPRC 2006. Available at SSRN: https://ssrn.com/abstract=2120277

Sumit K. Majumdar (Contact Author)

University of Texas at Dallas - Department of Information Systems & Operations Management ( email )

SM 33
800 W Campbell
Richardson, TX 75080
United States
972-883-4786 (Phone)
972-883-4841 (Fax)

Rabih Moussawi

Villanova University - Department of Finance ( email )

800 E Lancaster Ave
Bartley Hall, 2051
Villanova, PA 19085
United States

HOME PAGE: http://www.homepage.villanova.edu/rabih.moussawi

University of Pennsylvania - The Wharton School ( email )

United States

Ulku Yaylacicegi

University of North Carolina (UNC) at Wilmington ( email )

601 South College Road
Wilmington, NC 28403
United States

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