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

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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

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Citation

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

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Published date: December 2006

Identifiers

Local EPrints ID: 165725
URI: http://eprints.soton.ac.uk/id/eprint/165725
ISSN: 0340-8744
PURE UUID: 1b416fea-23f5-4f79-858b-91ef9be05e4d

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Date deposited: 20 Oct 2010 07:51
Last modified: 18 Jul 2017 12:27

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Author: Gerhard Kling

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