Event Studies in Merger Analysis: Review and an Application Using U.S. TNIC Data
30 Pages Posted: 10 Jan 2020 Last revised: 1 Apr 2020
Date Written: January 10, 2020
There is a growing concern that U.S. merger control may have been too lenient, but empirical evidence remains limited. After reviewing event studies as a method to acquire empirical insights into the competitive effects of mergers, I propose a novel application using Hoberg-Phillips TNIC data. This application allows for the ready approximation of abnormal stock market returns of likely competitors to 1,751 of the largest U.S. mergers since 1997. I document that likely competitors experience on average an abnormal return of close to one percent around a merger announcement. Abnormal returns are also strongly associated with concerns of market power, which suggests that competitors benefit at least in part because of an anticipation of anti-competitive effects -- and hence insufficient merger control.
Keywords: Mergers, Antitrust, Event Studies, Text-Based Network Industry Classification
JEL Classification: G14, G34, L13, L40
Suggested Citation: Suggested Citation