Competition Policy and the Profitability of Corporate Acquisitions

Gishan Dissanaike, Wolfgang Drobetz and Paul P. Momtaz

Journal of Corporate Finance, 2020, vol. 62, issue C

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); Acquirer returns; Acquisition efficiency; Bidder wealth effects; Antitrust law enforcement; Competition policy; Merger control; Law and finance; Takeover law (search for similar items in EconPapers)
JEL-codes: G30 G34 G38 K21 L4 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:62:y:2020:i:c:s0929119919301142

DOI: 10.1016/j.jcorpfin.2019.101510

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