The Effects of Antitrust Laws on Horizontal Mergers: International Evidence

The Effects of Antitrust Laws on Horizontal Mergers: International Evidence

 

 

Chune Young Chung

Chung-Ang University - College of Business & Economics

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Ji Hoon Hwang

University of Arizona, Eller College of Management, Department of Finance, Students

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship

 

Abstract

This study examines how antitrust law adoptions affect horizontal merger and acquisition (M&A) outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ five-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement (Baker (2003)). The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.