Analysis of the Merger Effect Using the Event Study Approach: Evidence from the Steel Industry in Japan
Tóm tắt
Mergers can bring with them not only efficiency gains but also anticompetitive effects. Moreover, when firms announce mergers with limited lead time and information, it is crucial that regulatory bodies be able to judge them appropriately. This paper examines a merger between NKK and Kawasaki Steel that had a deep economic impact. I employ the conventional event study approach using abnormal stock returns. In addition to investigating these two firms and their rival firms, I examine customer firms in four steel-consuming industries in order to paint a broader picture of mergers. I consider the reactions of abnormal returns as measured by twelve patterns, and identify several merger effects. Firms in the steel industry anticipated a significant increase in their future profits as a result of this merger. Of the customer firms, some anticipated an increase in their profits, whereas others expected to suffer losses. However, the statistical significance of their reactions was weak, and, thus, the merger’s effects on customer firms could not be measured accurately. The results suggest that the primary intent of this merger was to improve efficiency. Future studies should investigate the results of the merger in real terms, including its effects on steel prices and steel production, for example, rather than merely in financial terms.
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