Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers

Sven-Olof Fridolfsson and Johan Stennek ()
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Johan Stennek: Gothenburg University, Postal: School of Business, Economics and Law,

No 682, Working Paper Series from Research Institute of Industrial Economics

Abstract: There is diverging empirical evidence on the competitive effects of horizontal mergers: consumer prices (and thus presumably competitors' profits) often rise while competitors' share prices fall. Our model of endogenous mergers provides a possible reconciliation. It is demonstrated that anticompetitive mergers may reduce competitors' share prices, if the merger announcement informs the market that the competitors' lost a race to buy the target. Also the use of "first rumor" as an event may create similar problems of interpretation. We also indicate how the event-study methodology may be adapted to identify competitive effects and thus, the welfare consequences for consumers.

Keywords: Mergers & Acquisitions; Event Studies; Antitrust; In-play; Coalition Formation (search for similar items in EconPapers)
JEL-codes: G14 G34 L12 L41 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2006-12-06
New Economics Papers: this item is included in nep-com and nep-ind
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers (2010)
Working Paper: Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0682

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