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Takeovers and horizontal mergers: Policy and performance.

The dissertation examines takeovers and horizontal mergers, considering whether or not current policy seems appropriate. Focus lies on both predicted and actual market performance effects. Horizontal mergers are investigated in a product market context and takeovers in an asset market environment. Horizontal mergers. The horizontal merger research is concerned with the relationship of industry concentration and anticompetitive market outcomes. Historically, economists treat concentration and competitive performance as inversely related, and the Department of Justice Merger Guidelines (DOJMG) continue to do so in the screening of mergers to be challenged. Laboratory analysis allows for direct control of variables such as market definition, scale economies, barriers to entry and concentration, thus permitting tests of the potential tradeoff of anticompetitive outcomes and production efficiency due to merger. The experimental design takes both the DOJMG and economic theory into account. When the merged firm enjoys economies of scale, the merger is observed to have a significant impact on industry performance, namely in the competitive direction. The data suggest that if the antitrust authorities rely on the Herfindahl-Hirshman Index (HHI) as measured by sales as opposed to capacity they inappropriately increase the number of cases to be challenged. It remains to be seen whether or not a more useful predictor of the anticompetitive effects of mergers exists. The data indicate that the HHI based on capacity accompanied by an alteration of the policy demarcation line would improve measurement of the effect. Takeovers. The takeover study focuses on two buyout policies, the tender offer and market takeover. The latter policy represents a prohibition of tender offers, but with acquisition attempts permitted via the asset market. Investment and operating skills of management are controlled for by holding profitability of the target firm constant. Laboratory analysis incorporates treatments of certain versus uncertain dividend values. Results suggest that shareholder value added (SVA) is greater when an acquisition is attempted than in its absence, regardless of takeover method or its success. SVA associated with the tender offer and market treatments do not vary significantly under both the uncertain and certain dividend value treatments.
Date January 1990
CreatorsWellford, Charissa Pepin.
ContributorsSmith, Vernon L., Cox, James C., Isaac, R. Mark, Oaxaca, Ronald L.
PublisherThe University of Arizona.
Source SetsUniversity of Arizona
Detected LanguageEnglish
Typetext, Dissertation-Reproduction (electronic)
RightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.

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