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Pre-evaluating efficiency gains from potential mergers and acquisitions based on the resampling DEA approach: Evidence from China's railway sector

Xue-jie Bai, Jin Zeng and Yung-Ho Chiu ()

Transport Policy, 2019, vol. 76, issue C, 46-56

Abstract: This study combines resampling DEA and the potential merger gains model to pre-evaluate the efficiency gains of three representative M&A schemes (i.e. regional M&A, megamerger, and a coalition between ‘strong’ and ‘weak’ railway bureaus) for China's railway sector over the period 2011–2015. The results reveal that geographically meaningful M&As are better than the other two types in creating efficiency gains due to the special characteristic of the railway sector – network economics. The timing of M&As and the roles and endowments of the railway bureaus must also be considered before any merger. A proper M&A can produce a so-called ‘stimulant’ effect in the short run, but as the ‘stimulant's efficacy’ becomes exhausted over time, the M&A's effect will gradually turn weak. At this time, it is particularly important for policy-makers to introduce a series of desirable institutions. Finally, our empirical findings also support the view that an M&A between two (efficient or not) DMUs does not ensure positive efficiency gains.

Keywords: Resampling DEA; Virtual M&As; Potential efficiency gains; Railway bureaus (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.tranpol.2019.01.012

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