Corporate Acquisitions, Profitability, and Markup: Evidence from Europe
- Resource Type
- Article
- Authors
- David Arnold; Terry S. Moon; Amirhossein Tavakoli
- Source
- KIF working paper. Jul 19, 2022 2022(9):1
- Subject
- Investment Decision
Mergers and Acquisitions
Antitrust Policy
Productivity
- Language
- Korean
This paper assesses how corporate mergers and acquisitions (M&As) affect firms’ profitability and markups. Using financial data (2007 ~ 2018) for 10 European countries, we compare firms that went through M&As with similar non-M&A firms before and after the event. We find that acquirers’ and targets’ markups remain unchanged, while their profit margins fall substantially. Additional heterogeneity analyses based on sectors and industries reveal that our results are inconsistent with the market power channel. Taken together, these results suggest that corporate acquisitions do not seem to contribute to a rise in firms’ market power in the medium-run.