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The Effects of Antitrust Laws on Horizontal Mergers: International Evidence

Published online by Cambridge University Press:  14 April 2023

Chune Young Chung ,
Iftekhar Hasan Open the ORCID record for Iftekhar Hasan [Opens in a new window] ,
JiHoon Hwang  and
Incheol Kim
Chune Young Chung
Affiliation:
Chung-Ang University School of Business Administration bizfinance@cau.ac.kr
Iftekhar Hasan
Affiliation:
Fordham University, Bank of Finland and University of Sydney ihasan@fordham.edu
JiHoon Hwang*
Affiliation:
University of Arizona Eller College of Management
Incheol Kim
Affiliation:
University of Texas Rio Grande Valley College of Business & Entrepreneurship incheol.kim@utrgv.edu
*
jhwang@olemiss.edu (corresponding author)
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Abstract

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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Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 59 , Issue 7 , November 2024 , pp. 3267 - 3298
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank an anonymous referee, Paul Malatesta (the editor), Kristina Lalova (the FMA discussant), and seminar participants at the 2021 Financial Management Association (FMA) Annual Meeting. All errors are ours only.

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