The UK competition authorities are responsible for regulating company mergers thatwere originally considered to have adverse effects that were “against the publicinterest”, or presently that could result in a “substantial lessening of competition”. Theresearch in this thesis examines wider economic side effects of this regulatory policythat fall outside the remit of the competition authorities. Data on 63 merger cases thatwere subject to the merger regulatory process by the UK competition authoritiesbetween 1989 and 2002 are studied for effects on two economic aspects, shareholdervalue and managers’ motivations to undertake mergers.Some previous studies have suggested that competition regimes can destroy shareholdervalue. The research in this thesis confirms the finding from earlier studies of greatergains to shareholders in target rather than bidding companies, but does not findevidence supporting overall loss of shareholder value to target company shareholderswhen a merger is prohibited. It finds evidence that when the regulatory regime is stableand well understood the capital market behaves efficiently in response to newinformation. However, for a sub group of the mergers involving companies with a newregulatory regime, of which industry and the market had little or no experience withrespect to mergers, the capital market operated less efficiently.A number of studies have also considered the motivation of managers to follow amerger strategy. Apparently, none has looked at the influence of competition regulationon merger motives using stock market data and event study techniques. This researchexamined data for the stock market’s perceptions of what motivated managers to pursuetheir initial merger bid. The findings suggest that Synergy and Hubris dominate asmotivations for mergers and that, unintentionally, competition policy may help toreduce the number of mergers motivated by Managerialism.
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