The Impact of Specialist Firm Acquisitions on Market Quality

34 Pages Posted: 8 Jan 2001

See all articles by Brian C. Hatch

Brian C. Hatch

University of Cincinnati - Department of Finance - Real Estate

Shane A. Johnson

Texas A&M University - Department of Finance

Date Written: November 2000

Abstract

Acquisitions among specialist firms can increase specialist firm size, capitalization, and market concentration, and thus potentially have important effects on market quality. We examine the impact of NYSE specialist firm acquisitions on market quality and find that while stocks traded by both acquiring and target specialist firms show significant improvement in several market quality measures following acquisitions, similar changes are evident in price- and volume-matched control stocks traded by specialist firms not involved in acquisitions. We conclude that specialist firm acquisitions either do not improve market quality, or improve market quality, but competitive and other pressures (resulting partly from the acquisitions themselves) force improvements in market quality for control stocks also. Either interpretation implies that specialist acquisitions have not had deleterious effects on market quality.

Keywords: Specialists, mergers, acquisitions, market quality, trading costs

JEL Classification: G14, G19, G34

Suggested Citation

Hatch, Brian C. and Johnson, Shane A., The Impact of Specialist Firm Acquisitions on Market Quality (November 2000). Available at SSRN: https://ssrn.com/abstract=252188 or http://dx.doi.org/10.2139/ssrn.252188

Brian C. Hatch

University of Cincinnati - Department of Finance - Real Estate ( email )

Carl H. Lindner Hall
P.O. Box 210195
Cincinnati, OH 45221
United States
513-556-7076 (Phone)
513-556-0979 (Fax)

Shane A. Johnson (Contact Author)

Texas A&M University - Department of Finance ( email )

Mays School of Business
College Station, TX 77843-4218
United States
979-862-3318 (Phone)

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