Skip to main content
Article thumbnail
Location of Repository

Rival Reactions

By Nihat Aktas A, Eric De Bodt B and Richard Roll C

Abstract

Mergers and acquisitions (M&As) are major events, reshaping competition among related firms (traditionally called rivals). Despite their seeming importance, most M&A studies have found only a limited empirical impact on rival stock prices. Our paper revisits this issue using a novel approach to characterize the degree of interactions among related firms based on their stock return correlations after controlling for market and industry price movements. Our approach filters out firms that are not related and distinguishes business partners from direct competitors. The results indicate that M&A announcements are on average bad news for both business partners and direct competitors of the acquirer. This provides significant evidence that M&As reinforce an acquirer’s competitive advantage, a validation of the competitive pressure hypothesis. JEL classification: G3

Topics: Mergers and acquisitions, industry rivals, market power, competitive pressure * Corresponding author
Year: 2013
OAI identifier: oai:CiteSeerX.psu:10.1.1.352.3322
Provided by: CiteSeerX
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://citeseerx.ist.psu.edu/v... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.