Effects of merger and foreign alliance: An event study of the Canadian airline industry

Anming Zhang and Derek Aldridge

Transportation Research Part E: Logistics and Transportation Review, 1997, vol. 33, issue 1, 29-42

Abstract: This paper uses an event study methodology to investigate how investors have reacted to new information (events) affecting merger/foreign alliance possibilities in the Canadian airline industry for the 1992-1993 period. We find that news regarding the merger/foreign alliance possibilities had a significant impact on the stock prices of Air Canada and Canadian Airlines International (CAI). Furthermore, shareholders of both airlines preferred an alliance between CAI and American Airlines to a merger between the two domestic carriers. However, the preference does not necessarily suggest an industrial structure based interpretation, with investors expecting greater profits under a duopoly with foreign alliance partners than under a likely domestic monopoly.

Date: 1997
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