Mergers, Investment Decisions and Internal Organistion

Abstract

We analyse the effects of investment decisions and firms’ internal organisation on the efficiency and stability of horizontal mergers. In our framework economies of scale are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower total welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effectively realised. Moreover, the paper offers a possible explanation for merger failures. JEL Classification: L22, D43.

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Cite this paper

@inproceedings{BanalEstaol2004MergersID, title={Mergers, Investment Decisions and Internal Organistion}, author={Albert Banal-Esta{\~n}ol and In{\'e}s Macho-Stadler and Jo Seldeslachts and Margarida Catalao and Hans Degryse and Ram{\'o}n Faul{\'i} and David P{\'e}rez-Castrillo and Xavier Allu{\'e} Mart{\'i}nez}, year={2004} }