The Effects of Antitrust Laws on Horizontal Mergers: International Evidence

Chune Young Chung, Iftekhar Hasan, JiHoon Hwang and Incheol Kim

Journal of Financial and Quantitative Analysis, 2024, vol. 59, issue 7, 3267-3298

Abstract: This study examines how antitrust law adoptions affect horizontal merger and acquisition outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ 5-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. 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.

Date: 2024
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