论文笔记 | Anticompetitive effects of horizontal acquisitions: the impact of within-industry product

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离上篇博客过去快1个月。大半个月里，好像很忙，回想又不知道做了什么，过程中夹带着起伏不定的情绪，只能寄托于运气，期待返修一切顺利 =-=

暑假在期待中如约而至，我顺利溜走啦。但由于选题存在争议，所以具体规划还是不太明朗，暂定计划有学习《经济学、组织与管理》，其他另论，躺平认命~~

这篇论文笔记是上周老师分享的一篇关于并购的文章。整体读下来，选题有趣且经典，研究详实充分，而且写作上很值得借鉴学习，在论述上与相关的文献的对接工作做得很好，值得多加学习！

即将发表在JFE上的一篇文章：Anticompetitive effects of horizontal acquisitions: the impact of within-industry product similarity

故事：以往研究集中于横向并购会降低行业竞争这一议题，但是得到的结果却莫衷一是。基于此，本文作者从行业产品的相似性角度分析，研究横向并购与行业竞争的关系。作者认为，行业内产品相似性越高，行业内的公司越倾向于横向并购，并且这种结果是“共赢”的（自身、对手、目标方），但与此也招致了监管机构的注意。

1 Introduction

In this paper, we argue that both theory and practice highlight the importance of product homogeneity in the reduction in competition intensity following horizontal acquisitions in concentrated industries. We then == introduce a measure of within-industry product similarity that helps rationalize the mixed conclusions of the extant literature.== In doing so, we provide novel evidence on whether horizontal acquisitions enhance the market power of acquirers and their industry rivals.
1）construct such a measure using textual analysis of firms’ business descriptions from their 10-K filings and refer to it as Industry Product Similarity (IPS).
2）validate it as a measure for industry product similarity.
3）first show that IPS has a large positive effect on a firm’s unconditional likelihood of making a horizontal acquisition during a given year and the likelihood a completed deal is horizontal.
4）show that IPS has positive effects on both acquirer and rival firms’ announcement returns to horizontal acquisitions, and that the effects are driven by deals in concentrated industries.
5）additionally consider the effect of the degree to which firms in dependent customer industries are reliant on the output of the industry where the horizontal acquisition occurs.
6）investigate the effect of IPS on the target offer premium and the combined wealth gains of the acquirer and target firms at the acquisition announcement.
7）turn to the impact of IPS-motivated mergers：industry price changes .
8）these acquisitions should negatively impact the firms in dependent customer and supplier industries.
9）investigate the impact of IPS-motivated mergers on acquirer firm performance.
10）examine the effect of IPS on the likelihood that the FTC or DOJ challenges a proposed horizontal acquisition.
11）Predictions based on the competition reduction hypothesis apply most naturally to commodity-based industries. Conversely, these predictions are weaker in intellectual property-focused industries.
12）robust test：examine whether industry concentration on its own is related to the dependent variables in our tests.

2 Conceptual issues and US antitrust policy on horizontal mergers

2.1. Industry product similarity, firm interdependence, and coordination

1）Although, on average, industry product similarity should intensify price competition, extant theoretical work predicts that coordination is more likely in industries with high product similarity because in such industries there are fewer aspects on which firms have to collude。

2.2. Horizontal acquisitions as a means to reduce industry competition

Shapiro (2010) argues that industry concentration thresholds are “best suited to evaluate concerns about collusion in markets for homogeneous products.”

2.3. Empirical predictions

The discussion above implies that industry product similarity plays an important role in a horizontal acquisition’s increasing of pricing power for the merging firms and the remaining firms in the industry, and that when both similarity and concentration are high, such acquisitions will be especially likely to increase pricing power.

3 Sample and data

• Sample used for IPS validation tests
  

• Mergers and acquisitions data

the final sample includes 52,309 firm-year observations
with 6,471 unique firms

• Industry concentration data
  
• Producer Price Index data

• Identification of dependent customers and suppliers

• Federal Trade Commission and Department of Justice antitrust challenges

4 Description and validation of IPS as an industry competition measure

4.1. Construction of IPS

Why is IPS calculated for SIC industries instead of for 10-K text-based industries?

Validation of IPS as a measure for industry product similarity

5 Empirical findings

5.1. Industry product similarity and the likelihood of making a horizontal acquisition

Table 2 provides evidence regarding the impact of IPS on the likelihood a firm makes a horizontal acquisition of a listed or unlisted target in a given year.

5.2. Industry product similarity and acquirer and rival announcement returns

we examine the effect of IPS on acquirer and rival acquisition announcement returns.

5.3. Industry product similarity, target offer premiums, and merged firm wealth gains

We next test whether the target offer premium and the combined wealth gains of the acquirer and target firms in such acquisitions are a function of these benefits.

5.4. Industry product similarity, horizontal acquisitions, and changes in industry prices

The main economic channel through which the merger gains we observe are achieved is higher product prices. In Table 6 we provide evidence concerning the prediction that horizontal acquisitions in high IPS industries result in higher prices.

5.5. Dependent customer and supplier firm announcement returns

Given the Table 6 findings, we next examine whether horizontal acquisitions conducted in high IPS industries harm customer and supplier firms.

5.6. The impact of IPS on acquirer firm performance

We next investigate the effect of high IPS horizontal acquisitions on acquirer firm performance, and in doing so，also shed light into the extent to which such acquisitions provide acquirers with gains resulting from market power versus synergy creation.

5.7. Evidence from antitrust challenges

We investigate this prediction by hand-collecting information on merger enforcement actions over our sample period from the FTC and DOJ websites.

Panel A reports the percent of horizontal acquisitions that are challenged in low versus high IPS industries and reports
significance levels for whether they are significantly different across the low and high IPS subsamples.

Panel B reports multivariate evidence on the effect of IPS on the likelihood an acquisition is challenged.

Panel C examines the impact of the acquirer’s and rival firms’ announcement returns and the wealth gain of the combined merged firms on the effect of IPS on the likelihood an acquisition is subsequently challenged.

5.8. Commodity-based and intellectual property-focused industries

5.9. Industry concentration and the anticompetitive effects of horizontal acquisitions

5.10. Is IPS related to industry merger waves?

Given that in high IPS industries firms are expected to be more homogeneous, in such industries economic shocks should affect firms more similarly, which may lead to a higher likelihood of industry merger waves in these industries. If so, this could confound the inferences from our tests that use the IPS measure.

5.11. Diversified firms

A potential concern with the IPS measure is that more-diversified firms could be likely to use words in the business description section of their 10-K files that other firms in their industry do not use.

we drop industries with more-diversified firms from the analysis.

6 Conclusion

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