IDEAS home Printed from https://ideas.repec.org/a/eee/indorg/v21y2003i5p625-653.html
   My bibliography  Save this article

The effects of mergers: an international comparison

Author

Listed:
  • Gugler, Klaus
  • Mueller, Dennis C.
  • Yurtoglu, B. Burcin
  • Zulehner, Christine

Abstract

This paper analyzes the effects of mergers around the world over the past 15 years. We utilize a large panel of data on mergers to test several hypotheses about mergers. The effects of the mergers are examined by comparing the performance of the merging firms with control groups of nonmerging firms. The comparisons are made on profitability and sales. The results show that mergers on average do result in significant increases in profits, but reduce the sales of the merging firms. Interestingly, these post merger patterns look similar across countries. We also did not find dramatic differences between mergers in the manufacturing and the service sectors, and between domestic and cross-border mergers. Conglomerate mergers decrease sales more than horizontal mergers. By separating mergers into those that increase profits and those that reduce them and by then examining the patterns of sales changes following the mergers, we determine the effects of mergers on efficiency and market power. Our results suggest that those mergers that decrease profits and efficiency account for a large proportion. However, we can also identify mergers that increase profits by either increasing market power or by increasing efficiency. The first conclusion seems to be a more likely explanation for large companies, whereas the latter is likely to be true for small firms. ZUSAMMENFASSUNG - (Die Effekte von Fusionen: Ein internationaler Vergleich) Dieser Artikel analysiert die Effekte von Fusionen, die weltweit über die letzten 15 Jahre stattgefunden haben. Wir vergleichen die Gewinn- und Umsatzentwicklung von fusionierenden Firmen mit der Entwicklung von nicht-fusionierenden Firmen. Die Resultate zeigen, dass Fusionen im Durchschnitt zu signifikant höheren Profiten führen, aber dass die Umsätze im Vergleich zur Kontrollgruppe zurückbleiben. Interessanterweise sind diese Effekte bei Vergleichen zwischen den verschiedenen Ländern, bei einem Vergleich zwischen Industriesektor und Dienstleistungs
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003. "The effects of mergers: an international comparison," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 625-653, May.
    • Handle: RePEc:eee:indorg:v:21:y:2003:i:5:p:625-653
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-7187(02)00107-8
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Scott,John T., 2005. "Purposive Diversification and Economic Performance," Cambridge Books, Cambridge University Press, number 9780521022583, January.
    2. Goldberg, Lawrence G, 1973. "The Effect of Conglomerate Mergers on Competition," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 137-158, April.
    3. Mueller, Dennis C, 1985. "Mergers and Market Share," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 259-267, May.
    4. Suits, Daniel B, 1984. "Dummy Variables: Mechanics v. Interpretation," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 177-180, February.
    5. Dean F. Amel & Stephen A. Rhoades, 1989. "Empirical Evidence on the Motives for Bank Mergers," Eastern Economic Journal, Eastern Economic Association, vol. 15(1), pages 17-27, Jan-Mar.
    6. Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu & Christine Zulehner, 2001. "Effekte von Fusionen in Kontinentaleuropa und Deutschland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(2), pages 204-213.
    2. Dennis Mueller, 1996. "Antimerger policy in the United States: History and lessons," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(3), pages 229-253, October.
    3. Kamerbeek, S.P., 2009. "Merger Performance and Efficiencies in Horizontal Merger Policy in the US and the EU," MPRA Paper 18064, University Library of Munich, Germany.
    4. Rahman, Mahabubur & Lambkin, Mary & Hussain, Dildar, 2016. "Value creation and appropriation following M&A: A data envelopment analysis," Journal of Business Research, Elsevier, vol. 69(12), pages 5628-5635.
    5. Mueller, Dennis C., 1996. "Lessons from the United States's antitrust history," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 415-445, June.
    6. Pulak Mishra, 2018. "Are Mergers and Acquisitions Necessarily Anti-competitive? Empirical Evidence from India’s Manufacturing Sector," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(3), pages 276-307, August.
    7. Martynova, M. & Renneboog, L.D.R., 2005. "Takeover Waves : Triggers, Performance and Motives," Discussion Paper 2005-029, Tilburg University, Tilburg Law and Economic Center.
    8. Bhagat, Sanjai & Dong, Ming & Hirshleifer, David & Noah, Robert, 2005. "Do tender offers create value? New methods and evidence," Journal of Financial Economics, Elsevier, vol. 76(1), pages 3-60, April.
    9. Martynova, Marina & Renneboog, Luc, 2008. "A century of corporate takeovers: What have we learned and where do we stand?," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2148-2177, October.
    10. Martynova, M., 2006. "The market for corporate control and corporate governance regulation in Europe," Other publications TiSEM 8651e281-4914-41f2-ac14-1, Tilburg University, School of Economics and Management.
    11. Klaus Gugler & Ralph Siebert, 2007. "Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 645-659, November.
    12. Higgins, Matthew J. & Rodriguez, Daniel, 2006. "The outsourcing of R&D through acquisitions in the pharmaceutical industry," Journal of Financial Economics, Elsevier, vol. 80(2), pages 351-383, May.
    13. Engberg, John & Wholey, Douglas & Feldman, Roger & Christianson, Jon B., 2004. "The effect of mergers on firms' costs: evidence from the HMO industry," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(4), pages 574-600, September.
    14. Ralph Siebert, 2017. "Heterogeneous Merger Impacts on Competitive Outcomes," CESifo Working Paper Series 6607, CESifo.
    15. Gunther Tichy, 2001. "What Do We Know about Success and Failure of Mergers?," Journal of Industry, Competition and Trade, Springer, vol. 1(4), pages 347-394, December.
    16. Aloke Ghosh, 2004. "Increasing Market Share as a Rationale for Corporate Acquisitions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(1‐2), pages 209-247, January.
    17. Bisma Afzal Shah & Khursheed Ahmad Butt, 2019. "A Case Study of Acquisition of Avon Organics Limited by Arch Pharmalabs Limited," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 10(2), pages 08-14, May.
    18. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    19. Fu, Fangjian & Lin, Leming & Officer, Micah S., 2013. "Acquisitions driven by stock overvaluation: Are they good deals?," Journal of Financial Economics, Elsevier, vol. 109(1), pages 24-39.
    20. Maurizio Zollo, 1998. "Strategies or Routines ? Knowledge Codification, Path-Dependence and the Evolution of Post-Acquisition Integration Practices in the U.S. Banking Industry," Center for Financial Institutions Working Papers 97-10, Wharton School Center for Financial Institutions, University of Pennsylvania.

    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:21:y:2003:i:5:p:625-653. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505551 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.