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The Economic Impact of Merger Control Legislation

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  • Carletti, E.
  • Hartmann, P.
  • Ongena, S.

    (Tilburg University, TILEC)

Abstract

We construct a unique dataset of legislative reforms in merger control legislation that occurred in nineteen industrial countries in the period 1987-2004, and test the economic impact of these changes on firms? stock prices. In line with the standard monopolistic hypothesis, we find that the strengthening of merger control decreases the stock prices of non-financial firms. In contrast, we find that bank stock prices increase. Cross sectional regressions show that the discretion embedded in the supervisory control of bank mergers is a major determinant of the positive bank stock returns. This suggests that merger control is anticipated to provide a 'checks and balances' mechanism that mitigates the value-destroying influence of unmediated supervisory control. We provide a case study further supporting this interpretation.
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  • Carletti, E. & Hartmann, P. & Ongena, S., 2008. "The Economic Impact of Merger Control Legislation," Discussion Paper 2008-006, Tilburg University, Tilburg Law and Economic Center.
    • Handle: RePEc:tiu:tiutil:32141353-cba1-4335-bf6c-0b393552af99
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    Cited by:

    1. Carletti, Elena & Ongena, Steven & Siedlarek, Jan-Peter & Spagnolo, Giancarlo, 2015. "The Impact of Merger Legislation on Bank Mergers," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 530, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Patrice Bougette & Oliver Budzinski & Frédéric Marty, 2024. "Ex-ante versus Ex-post in Competition Law Enforcement: Blurred Boundaries and Economic Rationale," GREDEG Working Papers 2024-18, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France, revised Jul 2024.
    3. Svetlana B. Avdasheva & Dina V. Tsytsulina, 2014. "The Effects Of Competition Policy: Merger Approval, Entry Barrier Removal, Antitrust Enforcement Compared," HSE Working papers WP BRP 34/FE/2014, National Research University Higher School of Economics.
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    5. Carletti, Elena & Ongena, Steven & Siedlarek, Jan-Peter & Spagnolo, Giancarlo, 2021. "The impacts of stricter merger legislation on bank mergers and acquisitions: Too-Big-To-Fail and competition," Journal of Financial Intermediation, Elsevier, vol. 46(C).
    6. Ongena, Steven & Penas, María Fabiana, 2009. "Bondholders' wealth effects in domestic and cross-border bank mergers," Journal of Financial Stability, Elsevier, vol. 5(3), pages 256-271, September.
    7. Apergis, Nicholas & Dastidar, Sayantan Ghosh, 2024. "Local stock liquidity and local factors: Fresh evidence from US firms across states," Research in International Business and Finance, Elsevier, vol. 67(PA).
    8. Joaquín Maudos & Xavier Vives, 2019. "Competition Policy in Banking in the European Union," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 27-46, August.
    9. Kick, Thomas & Pfingsten, Andreas, 2011. "The importance of qualitative risk assessment in banking supervision before and during the crisis," Discussion Paper Series 2: Banking and Financial Studies 2011,09, Deutsche Bundesbank.
    10. Yuliya Demyanyk & Charlotte Ostergaard & Bent E. Sorensen, 2008. "Risk sharing and portfolio allocation in EMU," European Economy - Economic Papers 2008 - 2015 334, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

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    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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