Title

The Worst of Both Worlds: Megamergers are Anticompetitive and Inefficient

Publication Date

7-15-2019

Abstract

There is no consensus in the literature regarding the financial consequences of megamergers in part due to the difficulty in establishing a good counterfactual. By comparing the performance of these deals to the performance of synthetic mergers constructed using a novel matching procedure, we find no significant changes in return on assets after megamergers. This apparent non-result is driven by merged firms subsidizing their increased operating inefficiencies with higher markups. We show that this cross-subsidization effect is stronger in larger deals and in more concentrated industries, suggesting that our findings are driven by market power and quiet life considerations.

Document Type

Article

Keywords

Mergers and Acquistions; Megamergers; Merger Gains

Disciplines

Finance

DOI

10.2139/ssrn.3419538

Source

SMU Cox: Finance (Topic)

Language

English

Share

COinS