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Journal of Financial and Quantitative Analysis Vol. 59 No. 7 2024

The Effects of Antitrust Laws on Horizontal Mergers: International Evidence

Chune Young Chung1; Iftekhar Hasan2; JiHoon Hwang3; Incheol Kim4

1 Chung-Ang University School of Business Administration · 2 Fordham University, Bank of Finland and University of Sydney · 3 University of Arizona Eller College of Management, · 4 University of Texas Rio Grande Valley College of Business & Entrepreneurship

Abstract

This study examines how antitrust law adoptions affect horizontal merger and acquisition outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ 5-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. 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.

DOI
10.1017/s0022109023000467
Volume
59
Issue
7
Pages
3267-3298
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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