Article Abstract:
While the U.S. has pursued a vigorous antitrust policy towards horizontal mergers over the past four decades, mergers in Canada have until recently been permitted to take place in a virtually unrestricted antitrust environment. The absence of an antitrust overhang in Canada presents an interesting opportunity to test the conjecture that the rigid market share and concentration criteria of the U.S. policy effectively deters a significant number of potentially collusive mergers. The effective deterrence hypothesis implies that the probability of a horizontal merger being anticompetitive is higher in Canada than in the U.S. However, parameters in cross-sectional regressions reject the market power hypothesis on samples of both U.S. and Canadian mergers. Judging from the Canadian evidence, there simply isn't much to deter. (Reprinted by permission of the publisher.)
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Article Abstract:
Participants in corporate takeover bids appear to act in opposition to expected patterns of behavior; the participants frequently act in ways that do not maximize their value. When managers resist takeover bids in an effort to either drive takeover offers higher or to encourage others to make takeover offers, additional bids seldom occur. Consequently, management's resistance to takeover bidding is perhaps opposed to the shareholders' best interests. Similarly, the 'successful' takeover may create a devaluation of the purchaser's shares in the company. In light of these observed incongruities, a model identifying ideal value-maximizing behavior for participants in a takeover bidding process is developed.
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Article Abstract:
This study examines the revaluation of shares surrounding the cancellation of mergers over the years 1976-1985. The results are first categorized according to the party cancelling the merger and then by subsequent merger activity. The results are as expected: target firms that become involved in merger activity, subsequent to the cancellation, experience positive cumulative prediction errors (CPEs). Targets that do not become involved in subsequent merger activity have CPEs that return to pre-merger announcement levels. These results do not vary when bidders or targets cancel the merger. (Reprinted by permission of the publisher.)
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