The Effects of Antitrust Laws on Horizontal Mergers: International Evidence

This study examines how antitrust law adoptions affect horizontal merger and acquisition outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ 5-day cumulative abnormal returns surrounding horizontal merger announcements. A...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis Vol. 59; no. 7; pp. 3267 - 3298
Main Authors: Chung, Chune Young, Hasan, Iftekhar, Hwang, JiHoon, Kim, Incheol
Format: Journal Article
Language:English
Published: New York, USA Cambridge University Press 01.11.2024
Subjects:
Abnormal returns
Acquisitions & mergers
Announcements
Antitrust laws
Bias
Competition
Competition policy
Economies of scale
Efficiency
Enforcement
Hypotheses
Law
Mergers
Monopolies
Predatory pricing
Prices
Quantitative analysis
Stockholders
Welfare
ISSN:0022-1090, 1756-6916
Online Access:Get full text
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Summary:This study examines how antitrust law adoptions affect horizontal merger and acquisition outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ 5-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers’ announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement. The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.
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ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109023000467