Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 542: Why Event Studies Do Not Detect Anti-Competitive Mergers

Sven-Olof Fridolfsson () and Johan Stennek
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Sven-Olof Fridolfsson: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Johan Stennek: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Anticompetitive mergers increase competitors' profits, since they reduce competition. Using a model of endogenous mergers, we show that such mergers nevertheless may reduce the competitors' share-prices. Thus, event-studies can not detect anti-competitive mergers.

Keywords: Mergers & Acquisitions; Event Studies; Antitrust; Coalition Formation

JEL-codes: G14; G34; L12; L41

8 pages, December 14, 2000

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