The Effects of Antitrust Laws on Horizontal Mergers: International Evidence

Journal of Financial and Quantitative Analysis, Forthcoming

52 Pages Posted: 9 Jan 2023

See all articles by Chune Young Chung

Chune Young Chung

Chung-Ang University - College of Business & Economics

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Ji Hoon Hwang

University of Arizona, Eller College of Management, Department of Finance, Students

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship

Date Written: January 6, 2023

Abstract

This study examines how antitrust law adoptions affect horizontal merger and acquisition (M&A) outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ five-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement (Baker (2003)). The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.

Keywords: antitrust law, merger control, horizontal M&A, market power

JEL Classification: G14, G34

Suggested Citation

Chung, Chune Young and Hasan, Iftekhar and Hwang, Ji Hoon and Kim, Incheol, The Effects of Antitrust Laws on Horizontal Mergers: International Evidence (January 6, 2023). Journal of Financial and Quantitative Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4319600 or http://dx.doi.org/10.2139/ssrn.4319600

Chune Young Chung

Chung-Ang University - College of Business & Economics ( email )

84 Heuk-suk Ro
Seoul
Korea, Republic of (South Korea)

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Ji Hoon Hwang

University of Arizona, Eller College of Management, Department of Finance, Students ( email )

McClelland Hall
P.O. Box 210108
Tuscon, AZ 85721
United States

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship ( email )

1201 W University Dr
Edinburg, TX 78539
United States

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