Mergers in Regulated Industries: The Uses and Abuses of Event Studies

Alan J Cox and Jonathan Portes

Journal of Regulatory Economics, 1998, vol. 14, issue 3, 304 pages

Abstract: Merging utilities are frequently required to share the economic benefits of a merger with ratepayers. These benefits are often measured using stock price movements at the time of the merger announcement. While event studies of this sort can be a powerful and appropriate tool, improper application and interpretation can lead to misleading conclusions. In this paper, we review the basic event study approach to merger evaluation and discuss some of the complicating factors. We describe both flawed and correctly done event studies submitted in the merger application of SBC Communications and Pacific Telesis and some additional case studies. Copyright 1998 by Kluwer Academic Publishers

Date: 1998
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