The Economic Impact of Merger Control Legislation

Elena; HARTMANN, Philipp; ONGENA, Steven Carletti,
Authors registered in the RePEc Author Service: Philipp Hartmann and Steven Ongena

No ECO2012/12, Economics Working Papers from European University Institute

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 investigate the economic impact of these changes on stock prices. In line with the hypothesis that merger control should challenge anticompetitive mergers and thus limit future monopolistic profits, 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 create a “separation of powers” and “checks and balances” mechanism in the banking sector that mitigates the potential for abuse and wasteful enforcement of the supervisory control. We provide a case study further supporting this interpretation.

Keywords: merger control; legal institutions; financial regulation (search for similar items in EconPapers)
JEL-codes: D4 G21 G28 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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Related works:
Journal Article: The economic impact of merger control legislation (2015)
Working Paper: The Economic Impact of Merger Control Legislation (2011)
Working Paper: The Economic Impact of Merger Control Legislation (2008)
Working Paper: The Economic Impact of Merger Control Legislation (2008)
Working Paper: The economic impact of merger control legislation (2007)
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