Anticompetitive Effects of Horizontal Acquisitions

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

Topic: Anticompetitive Effects of Horizontal Acquisitions: The Impact of Within-Industry Product Similarity

Speaker: Sandy Klasa, University of Arizona

Abstract:      

This study provides novel evidence on whether horizontal acquisitions are motivated to reduce industry competition intensity. We examine the effect of within-industry product similarity, associated with intense industry competition, on a firm’s propensity to make a horizontal acquisition, and the impact of the acquisition on the firm, its rivals, and supplier and customer firms. Industry product similarity positively impacts a firm’s propensity of making a horizontal acquisition and acquisition announcement returns for the firm and its industry rivals. Consistent with these effects being driven by firms in industries with high product similarity trying to reduce competition intensity, these effects are more pronounced when other aspects of an industry further intensify competition. Horizontal acquisitions conducted in industries with high product similarity also lead to increases in industry prices and reduce firm value in dependent customer and supplier industries. Overall, our findings imply that in industries with high product similarity, horizontal acquisitions are used to raise incumbent firms’ market power.

Date: Wednesday, 27th March 2019     

Time: 12.00 – 1.00 p.m.

Venue: University of Technology Sydney
             Building 8, Room 8.002, Dr Chau Chak Wing Building
             Dr Chau Chak Wing Building
             14 - 28 Ultimo Road, Ultimo

Co-ordinator: Kris Glover  (Ph: +61 2 9514 7778)

Enquiries: Duncan Ford (Ph: +61 2 9514 7714)