Journal of Economics and Finance

, Volume 38, Issue 1, pp 27–52

The influence of industry concentration on merger motives—empirical evidence from machinery industry mergers

Article

DOI: 10.1007/s12197-011-9202-y

Cite this article as:
Geiger, F. & Schiereck, D. J Econ Finan (2014) 38: 27. doi:10.1007/s12197-011-9202-y

Abstract

By linking industrial organization theory and capital market research, we provide empirical evidence that merger motives of firms are influenced by underlying industry concentration. Analyzing wealth effects on target, acquirer and rival firms in the machinery industry, we observe significant different capital market reactions among merger announcements in dependence of underlying industry concentration. suggesting that different takeover motives prevail in fragmented and concentrated industries. In contrast to previous studies, we find besides efficiency motives evidence for monopolistic collusion motives in fragmented industries. Mergers in concentrated industries are primarily motivated to achieve productive efficiency gains. The absence of collusion motives may be an indication for a successful enforcement of antitrust legislation. Our results suggest that the magnitude of the influence of industry concentration in empirical merger motive research may have been previously under-estimated leading to a potential distortion of results.

Keywords

Industry ConcentrationMerger MotiveEvent StudyM&A

JEL Classification

G14G34

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Endowed Chair of Banking and Finance, European Business School (EBS)International UniversityOestrich-WinkelGermany
  2. 2.Faculty of Business Administration, Economics & LawDarmstadt University of TechnologyDarmstadtGermany