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Mergers in the Electric Utility Industry in a Deregulatory Environment

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  • Leggio, Karyl B
  • Lien, Donald

Abstract

We document that the merger announcement returns are positive and significant for targets of acquiring electric utility industry firms, but are not as algebraically large as target returns documented in non-regulated industry merger announcements. Additionally, electric utility acquirer firms earn significant negative announcement returns when acquiring an electric utility. We find announcement returns for acquirers vary significantly based upon the timing of the merger announcement, with mergers announced after the Energy Policy Act of 1992 generating negative returns for acquirers. We also find a significant difference in the percentage change in aggregate entity value around the announcement date for diversifying mergers as compared to non-diversifying mergers, with diversifying merger announcements resulting in a decrease in aggregate entity value. Copyright 2000 by Kluwer Academic Publishers

Suggested Citation

  • Leggio, Karyl B & Lien, Donald, 2000. "Mergers in the Electric Utility Industry in a Deregulatory Environment," Journal of Regulatory Economics, Springer, vol. 17(1), pages 69-85, January.
    • Handle: RePEc:kap:regeco:v:17:y:2000:i:1:p:69-85
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    Cited by:

    1. ten Brug, Hans & Rao Sahib, Padma, 2018. "Abandoned deals: the merger and acquisition process in the electricity and gas industry," Energy Policy, Elsevier, vol. 123(C), pages 230-239.
    2. Pereira, Guillermo Ivan & Niesten, Eva & Pinkse, Jonatan, 2022. "Sustainable energy systems in the making: A study on business model adaptation in incumbent utilities," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    3. Monastyrenko, Evgenii, 2017. "Eco-efficiency outcomes of mergers and acquisitions in the European electricity industry," Energy Policy, Elsevier, vol. 107(C), pages 258-277.
    4. Kwoka, John & Pollitt, Michael, 2010. "Do mergers improve efficiency? Evidence from restructuring the US electric power sector," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 645-656, November.
    5. Li, Minghui & Liu, Chong & Shen, Chaohai, 2020. "Does cheap electricity in a target's location add value to the acquirer? Evidence from China," Energy Policy, Elsevier, vol. 145(C).
    6. Luis Gautier & Mahelet G. Fikru, 2024. "Electric Utility Mergers in the Presence of Distributed Renewable Energy," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 63-92, Springer.
    7. Ovtchinnikov, Alexei V., 2013. "Merger waves following industry deregulation," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 51-76.
    8. Ralph Sonenshine, 2016. "Effect of Utility Deregulation and Mergers on Consumer Welfare," Working Papers 2016-08, American University, Department of Economics.
    9. Nogata, Daisuke & Uchida, Konari & Goto, Naohisa, 2011. "Is corporate governance important for regulated firms’ shareholders?," Journal of Economics and Business, Elsevier, vol. 63(1), pages 46-68.
    10. Carlo Scarpa & Giacomo Calzolari, 2009. "On Regulation and Competition: Pros and Cons of a Diversified Monopolist," Working Papers 2009.55, Fondazione Eni Enrico Mattei.
    11. Scarpa, Carlo & Calzolari, Giacomo, 2007. "Regulating a Multi-Utility Firm," CEPR Discussion Papers 6238, C.E.P.R. Discussion Papers.
    12. Kishimoto, Jo & Goto, Mika & Inoue, Kotaro, 2017. "Do acquisitions by electric utility companies create value? Evidence from deregulated markets," Energy Policy, Elsevier, vol. 105(C), pages 212-224.
    13. John Becker-Blease & Lawrence Goldberg & Fred Kaen, 2008. "Mergers and acquisitions as a response to the deregulation of the electric power industry: value creation or value destruction?," Journal of Regulatory Economics, Springer, vol. 33(1), pages 21-53, February.
    14. repec:wsr:wpaper:y:2016:i:169 is not listed on IDEAS
    15. Teti, Emanuele & Tului, Stefano, 2020. "Do mergers and acquisitions create shareholder value in the infrastructure and utility sectors? Analysis of market perceptions," Utilities Policy, Elsevier, vol. 64(C).
    16. Giacomo Calzolari & Carlo Scarpa, 2016. "Conglomerates And Regulation," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1648-1669, July.
    17. Mika Goto & Tadaaki Tomikawa & Toshiyuki Sueyoshi, 2024. "Efficiency and Mergers and Acquisitions of Electric Utility Companies," Energies, MDPI, vol. 17(8), pages 1-17, April.
    18. Ohsung Kwon & Sangmin Lim & Duk Hee Lee, 2018. "Acquiring startups in the energy sector: a study of firm value and environmental policy," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1376-1384, December.
    19. Yoo, Kyungjin & Lee, Youah & Heo, Eunnyeong, 2013. "Economic effects by merger and acquisition types in the renewable energy sector: An event study approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 26(C), pages 694-701.
    20. Nogata, Daisuke & Uchida, Konari & Goto, Naohisa, 2011. "Is corporate governance important for regulated firms' shareholders?: Evidence from Japanese mergers and acquisitions," Journal of Economics and Business, Elsevier, vol. 63(1), pages 46-68, January.

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