Competition Policy and the Profitability of Corporate Acquisitions

63 Pages Posted: 2 Nov 2016 Last revised: 13 Sep 2019

See all articles by Gishan Dissanaike

Gishan Dissanaike

University of Cambridge - Judge Business School

Wolfgang Drobetz

University of Hamburg

Paul P. Momtaz

Technische Universität München (TUM) - TUM School of Management; University College London Center for Blockchain Technologies; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: August 1, 2019

Abstract

Merger control exists to help safeguard effective competition. However, findings from a natural experiment suggest that regulatory merger control reduces the profitability of corporate acquisitions. Uncertainty about merger control decisions reduces takeover threats from foreign and very large acquirers, therefore facilitating agency-motivated deals. Valuation effects are more pronounced in countries with stronger law enforcement and in more concentrated industries. Our results suggest that competition policy may impede the efficiency of the M&A market.

Keywords: Mergers and Acquisitions (M&a), Takeovers, Acquirer Returns, Acquisition Efficiency, Bidder Wealth Effects, Antitrust Law Enforcement, Competition Policy, Merger Control, Law and Finance

JEL Classification: G30, G34, G38, K21, L4

Suggested Citation

Dissanaike, Gishan and Drobetz, Wolfgang and Momtaz, Paul P., Competition Policy and the Profitability of Corporate Acquisitions (August 1, 2019). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2862551 or http://dx.doi.org/10.2139/ssrn.2862551

Gishan Dissanaike

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+441 223 339626 (Phone)
+441 223 339701 (Fax)

Wolfgang Drobetz

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Paul P. Momtaz (Contact Author)

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, 80333
Germany

University College London Center for Blockchain Technologies ( email )

UCL CBT UCL Computer Science
Malet Place London WC
London, London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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