Sources of Gains in Corporate Mergers: Refined Tests from a Neglected Industry

Our work provides refined tests of the source of merger gains in a neglected industry: utilities. Utilities offer fertile ground for analysis of traditional theories: synergy, collusion, hubris, and anticipation. Utility mergers create wealth for the combined firm, consistent with both the synergy a...

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Bibliographic Details
Published inJournal of financial and quantitative analysis Vol. 47; no. 1; pp. 57 - 89
Main Authors Becher, David A., Mulherin, J. Harold, Walkling, Ralph A.
Format Journal Article
LanguageEnglish
Published New York, USA Cambridge University Press 01.02.2012
Subjects
Business networks
Collusion
Commercial concentration
Consumer prices
Deregulation
Electric utilities
Electricity
Enterprises
Gas utilities
Geographic regions
Geography
Industrial economics
Industrial regulation
Mergers
P values
Prices
Public utilities
Stock returns
Synergy
Utilities
Utility rates
Wealth
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Summary:Our work provides refined tests of the source of merger gains in a neglected industry: utilities. Utilities offer fertile ground for analysis of traditional theories: synergy, collusion, hubris, and anticipation. Utility mergers create wealth for the combined firm, consistent with both the synergy and collusion hypotheses. To distinguish between these hypotheses, we study rival stock returns across dimensions related to collusion: deregulation, geography, and horizontal and withdrawn deals. We also find that the impact of mergers on consumer prices is consistent with synergy rather than collusion. Analysis of industry rivals that become targets also rejects collusion and is consistent with anticipation.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109012000026