This thesis tests the effects of merger proposal and antitrust complaint announcements on the abnormal performance of acquirers, targets, and their horizontal rivals. The market power hypothesis is examined for a sample of 195 horizontal mergers (152 unchallenged and 43 challenged) and their horizontal rivals. The predictions of the market power and economic efficiency hypotheses are that the bidder and target firms generate positive and negative (or zero) abnormal returns relative to the merger proposal and antitrust complaint announcements, respectively. These hypotheses also predict the sign for the horizontal rivals with regard to both announcements. Our evidence does not support the market power hypothesis since the performance of horizontal rivals exhibit positive abnormal returns over the merger proposal period and zero abnormal returns over the antitrust complaint announcement. Such abnormal returns are consistent with the information model of the economic efficiency hypothesis.
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