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The influence of industry concentration on merger motives—empirical evidence from machinery industry mergers

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  • Florian Geiger
  • Dirk Schiereck

Abstract

By linking industrial organization theory and capital market research, we provide empirical evidence that merger motives of firms are influenced by underlying industry concentration. Analyzing wealth effects on target, acquirer and rival firms in the machinery industry, we observe significant different capital market reactions among merger announcements in dependence of underlying industry concentration. suggesting that different takeover motives prevail in fragmented and concentrated industries. In contrast to previous studies, we find besides efficiency motives evidence for monopolistic collusion motives in fragmented industries. Mergers in concentrated industries are primarily motivated to achieve productive efficiency gains. The absence of collusion motives may be an indication for a successful enforcement of antitrust legislation. Our results suggest that the magnitude of the influence of industry concentration in empirical merger motive research may have been previously under-estimated leading to a potential distortion of results. Copyright Springer Science+Business Media, LLC 2014

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  • Florian Geiger & Dirk Schiereck, 2014. "The influence of industry concentration on merger motives—empirical evidence from machinery industry mergers," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(1), pages 27-52, January.
    • Handle: RePEc:spr:jecfin:v:38:y:2014:i:1:p:27-52
    DOI: 10.1007/s12197-011-9202-y
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    2. Worek, Maija & De Massis, Alfredo & Wright, Mike & Veider, Viktoria, 2018. "Acquisitions, disclosed goals and firm characteristics: A content analysis of family and nonfamily firms," Journal of Family Business Strategy, Elsevier, vol. 9(4), pages 250-267.
    3. Zhiqi Chen & Gang Li, 2018. "Do Merger Efficiencies Always Mitigate Price Increases?," Journal of Industrial Economics, Wiley Blackwell, vol. 66(1), pages 95-125, March.
    4. Pilar López-Delgado & Julio Diéguez-Soto & María J. Martínez-Romero & Teresa Mariño-Garrido, 2024. "Acquisition activity: do firm age and family control matter?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 14(2), pages 447-473, June.
    5. Mittal, Amit & Garg, Ajay Kumar, 2017. "Private information implications for acquirers and targets in horizontal mergers," MPRA Paper 85355, University Library of Munich, Germany.
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    More about this item

    Keywords

    Industry Concentration; Merger Motive; Event Study; M&A; G14; G34;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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