The Effects of Horizontal Merger Operating Efficiencies on Rivals, Customers, and Suppliers

Review of Finance, Forthcoming

47 Pages Posted: 26 Sep 2013 Last revised: 16 May 2018

See all articles by Gennaro (帅纳) Bernile

Gennaro (帅纳) Bernile

University of Miami - Department of Finance

Evgeny Lyandres

Boston University

Date Written: May 11, 2018

Abstract

We study how operating efficiencies in horizontal mergers affect market reactions of merging firms' rivals, customers, and suppliers. We measure operating efficiency gains using projections disclosed by merging firms' insiders. Higher efficiency gains are associated with lower announcement returns to merging firms' rivals (due to increased equilibrium output of merging firms), higher returns to their customers (due to lower equilibrium price of merging firms' output), and higher returns to their suppliers (due to the merged firm's higher equilibrium demand for inputs). Our results suggest that the pass-through of efficiency gains along merging firms' supply chains is as important as the effects of post-merger changes in market power.

Keywords: horizontal mergers, synergies, competitors, customers, suppliers

JEL Classification: G34, L13

Suggested Citation

Bernile, Gennaro (帅纳) and Lyandres, Evgeny, The Effects of Horizontal Merger Operating Efficiencies on Rivals, Customers, and Suppliers (May 11, 2018). Review of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2330871 or http://dx.doi.org/10.2139/ssrn.2330871

Gennaro (帅纳) Bernile

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Evgeny Lyandres (Contact Author)

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617-3582279 (Phone)

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