The Negative Effects of Mergers and Acquisitions on the Value of Rivals

53 Pages Posted: 1 May 2017 Last revised: 4 Oct 2017

See all articles by François Derrien

François Derrien

HEC Paris - Finance Department

Laurent Frésard

University of Lugano; Swiss Finance Institute; University of Maryland - Robert H. Smith School of Business

Victoria Slabik

HEC Paris (Groupe HEC), Finance Department

Philip Valta

University of Bern

Date Written: October 3, 2017

Abstract

Average stock price reactions of industry rivals in horizontal U.S. mergers and acquisitions around deal announcements are robustly negative. This finding is in contrast to the results in the existing literature, which focuses on smaller samples of deals involving mostly publicly listed firms. Rivals’ returns are more negative in growing and concentrated industries. Moreover, the negative rivals’ stock price reactions are related to future decreases in operating performance, increased probability of bankruptcy and challenges by antitrust authorities, and increased probability of rivals’ future acquisitions. Overall, these results suggest that M&As have strong competitive effects for the rivals of target companies.

Keywords: M&As

JEL Classification: G34

Suggested Citation

Derrien, François and Frésard, Laurent and Slabik, Victoria and Valta, Philip, The Negative Effects of Mergers and Acquisitions on the Value of Rivals (October 3, 2017). HEC Paris Research Paper No. FIN-2017-1204. Available at SSRN: https://ssrn.com/abstract=2960576 or http://dx.doi.org/10.2139/ssrn.2960576

François Derrien (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
33 1 39 67 72 98 (Phone)

HOME PAGE: http://www.hec.fr/derrien

Laurent Frésard

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, Ticino 6900
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Victoria Slabik

HEC Paris (Groupe HEC), Finance Department ( email )

France

Philip Valta

University of Bern ( email )

Engehaldenstrasse 4
Bern, 3012
Switzerland

Register to save articles to
your library

Register

Paper statistics

Downloads
299
rank
94,593
Abstract Views
1,586
PlumX