Anticompetitive effects of horizontal acquisitions: The impact of within-industry product similarity

Maryam Fathollahi, Jarrad Harford () and Sandy Klasa

Journal of Financial Economics, 2022, vol. 144, issue 2, 645-669

Abstract: Theory predicts that horizontal acquisitions can effectively increase incumbent firms’ market power in concentrated industries with high product similarity. Using a novel measure for industry product similarity, we show that in such industries firms’ propensity to make horizontal acquisitions is greater and that the acquisitions result in more positive announcement returns for the acquirer and rival firms and in a larger premium paid for the target. Also, the deals harm dependent customer and supplier firms and they are more likely to be challenged by antitrust authorities. Overall, by emphasizing the importance of product similarity, our results help explain mixed empirical findings on whether horizontal acquisitions are used to reduce competition intensity.

Keywords: Horizontal acquisitions; Product similarity; Product market competition; Industry concentration (search for similar items in EconPapers)
JEL-codes: G34 L11 L22 L41 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:2:p:645-669

DOI: 10.1016/j.jfineco.2021.06.017

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