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Effects of merger and foreign alliance: An event study of the Canadian airline industry

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  • Zhang, Anming
  • Aldridge, Derek

Abstract

This paper uses an event study methodology to investigate how investors have reacted to new information (events) affecting merger/foreign alliance possibilities in the Canadian airline industry for the 1992-1993 period. We find that news regarding the merger/foreign alliance possibilities had a significant impact on the stock prices of Air Canada and Canadian Airlines International (CAI). Furthermore, shareholders of both airlines preferred an alliance between CAI and American Airlines to a merger between the two domestic carriers. However, the preference does not necessarily suggest an industrial structure based interpretation, with investors expecting greater profits under a duopoly with foreign alliance partners than under a likely domestic monopoly.

Suggested Citation

  • Zhang, Anming & Aldridge, Derek, 1997. "Effects of merger and foreign alliance: An event study of the Canadian airline industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(1), pages 29-42, March.
    • Handle: RePEc:eee:transe:v:33:y:1997:i:1:p:29-42
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    Cited by:

    1. Ho, Chun-Yu & McCarthy, Patrick & Wang, Yanhao, 2021. "Competition and countervailing power: Evidence from the China Eastern and Shanghai Airlines merger," Journal of Air Transport Management, Elsevier, vol. 91(C).
    2. Denis Cormier & Daniel Coulombe & Luania Gomez Gutierrez & Bruce J. Mcconomy, 2018. "Firms in Transition: A Review of the Venture Capital, IPO, and M&A Literature," Accounting Perspectives, John Wiley & Sons, vol. 17(1), pages 9-88, March.
    3. Xiong, Yangchun & Lam, Hugo K.S. & Hu, Qiaoxuan & Yee, Rachel W.Y. & Blome, Constantin, 2021. "The financial impacts of environmental violations on supply chains: Evidence from an emerging market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 151(C).
    4. Alexandrou, George & Gounopoulos, Dimitrios & Thomas, Hardy M., 2014. "Mergers and acquisitions in shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 61(C), pages 212-234.
    5. Zheng, Shiyuan & Ge, Ying-En & Fu, Xiaowen & Jiang, Changmin, 2019. "Voluntary carbon offset and airline alliance," Transportation Research Part B: Methodological, Elsevier, vol. 123(C), pages 110-126.
    6. Cai, Yifei & Zhang, Yahua & Wu, Yanrui & Chang, Tsangyao, 2024. "Airline stock market performance and political relations: A cross-quantilogram analysis of Chinese and US carriers," Transport Policy, Elsevier, vol. 155(C), pages 124-149.
    7. Nicolau, Juan Luis & Sharma, Abhinav, 2022. "A review of research into drivers of firm value through event studies in tourism and hospitality: Launching the Annals of Tourism Research curated collection on drivers of firm value through event stu," Annals of Tourism Research, Elsevier, vol. 95(C).
    8. Ho, Chun-Yu & McCarthy, Patrick & Wang, Yanhao, 2020. "Decomposing sources of gain from airline mergers: A model and case study from China," Research in Transportation Economics, Elsevier, vol. 84(C).
    9. Lina M. Cortés & John J. García & David Agudelo, 2015. "Effects of Mergers and Acquisitions on Shareholder Wealth: Event Study for Latin American Airlines," Documentos de Trabajo de Valor Público 12453, Universidad EAFIT.
    10. Wen, Yuh-Horng & Hsu, Chaug-Ing, 2006. "Interactive multiobjective programming in airline network design for international airline code-share alliance," European Journal of Operational Research, Elsevier, vol. 174(1), pages 404-426, October.
    11. Ching, Stephen & Fu, Yuming, 2003. "Contestability of the urban land market: an event study of Hong Kong land auctions," Regional Science and Urban Economics, Elsevier, vol. 33(6), pages 695-720, October.

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