The Real Product Market Impact of Mergers

60 Pages Posted: 18 Mar 2011 Last revised: 4 Feb 2014

See all articles by Albert Sheen

Albert Sheen

University of Oregon - Department of Finance

Date Written: October 23, 2013

Abstract

I document sources of value creation in mergers by analyzing novel data on the quality and price of goods sold by merging firms. When two competitors in a product market merge, their products converge in quality, and prices fall relative to the competition. These effects take two to three years to be fully realized and are stronger in mature, slow growth industries. Prices do not fall, however, when the acquirer is diversifying into a new product market. This direct evidence of real changes induced by merger activity is consistent with consolidation by related merging firms to achieve operational efficiencies and lower costs.

Suggested Citation

Sheen, Albert, The Real Product Market Impact of Mergers (October 23, 2013). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1787173 or http://dx.doi.org/10.2139/ssrn.1787173

Albert Sheen (Contact Author)

University of Oregon - Department of Finance ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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