Does the merger paradox exist even without any regulations? Evidence from Germany in the pre-1914 period


Kling, Gerhard (2006) Does the merger paradox exist even without any regulations? Evidence from Germany in the pre-1914 period. Empirica, 33, (5), 315-328. (doi:10.1007/s10663-006-9019-7).

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Description/Abstract

This paper measures the market response triggered by merger announcements in an environment without regulations and without a strong separation of ownership and control in Germany. Based on event study methods applied to daily data and regression analyses, I evaluate whether the merger paradox existed, and how firm size, the way of financing a merger, and industry factors influenced the success of acquirers. Hence, my study can shed some light on commonly believed explanations for the bad performance of mergers. The whole portfolio of acquirers exhibited positive cumulated abnormal returns, which indicates a rejection of the merger paradox—but market values of some companies declined. Particularly, acquiring banks lost shareholder value, although the majority of mergers occurred in the banking industry. Caused by the new exchange law, banks were in a merger wave. Therefore, alternative explanations like the minimax-regret principle might explain why banks merged in spite of lacking success

Item Type: Article
ISSNs: 0340-8744 (print)
1573-6911 (electronic)
Subjects: H Social Sciences > HC Economic History and Conditions
Divisions: University Structure - Pre August 2011 > School of Management
ePrint ID: 165725
Date Deposited: 20 Oct 2010 07:51
Last Modified: 27 Mar 2014 19:18
URI: http://eprints.soton.ac.uk/id/eprint/165725

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