Copyfrom：Dept. of Trade Economics Time：2020-11-03
Theme：Horizontal Mergers, Investments, and Industry Evolution
Speaker：Dongxu Li (Xiamen University)
Tencent Meeting: https://meeting.tencent.com/s/iCTV6cupLuWL
ID: 996 126 773
I empirically investigate corporate investments in response to horizontal mergers in the industry. The results show that in the three years subsequent to horizontal mergers, the non-merging rival firms decrease investments in PP&E and labor. The innovative firms increase R&D while the less innovative firms raise advertising. Firms with larger investment changes experience smaller reductions in profitability and equity valuation. In addition, I show that firms that operate in multiple industries tend to concentrate investments in segments that are more related to the horizontal merger’s industry. Such investment shifts are associated with higher investment efficiency. Overall, these findings indicate that firms on average perceive horizontal mergers as competitive threats. They actively make investment changes to survive competition. This paper sheds light on the idea that industry concentration can be one factor that drives industry evolution.
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