Industry structure and horizontal takeovers: Analysis of wealth effects on rivals,suppliers, and corporate customers |
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| Institution: | 1. Eller College of Management, University of Arizona, Tucson, AZ 85721, United States;2. Krannert School of Management, Purdue University, West Lafayette, IN 47907, United States;1. School of Economics and Management, University of Minho, Portugal;2. University of Southern Queensland, Australia;1. Dartmouth College, Tuck School of Business, Hanover, NH 03755, USA;2. Norwegian School of Economics, Helleveien 30, Bergen 5045, Norway;3. European Corporate Governance Institute, c/o the Royal Academies of Belgium, Palace of the Academies, Brussels 1000, Belgium;4. US Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549, USA;5. Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX, UK |
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| Abstract: | We examine the wealth effects of horizontal takeovers on rivals of the merging firms, and on firms in the takeover industry's supplier and customer industries. Inconsistent with the collusion and buyer power motives, we find significant positive abnormal returns to rivals, suppliers, and corporate customers for the subsample of takeovers with positive combined wealth effect to target and bidder shareholders. Overall, our findings suggest that the average takeover in our sample is driven by efficiency considerations. However, we find evidence suggesting that horizontal takeovers increase the buyer power of the merging firms if suppliers are concentrated. |
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