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Is the efficiency doctrine valid? An evaluation of US local exchange telecommunications company mergers

Is the efficiency doctrine valid? An evaluation of US local exchange telecommunications company... Purpose – The purpose of this paper is to evaluate the impact of the various mergers of the local exchange companies in the USA. Design/methodology/approach – The authors evaluate all of the mergers that took place between 1988 and 2001 on several measures of performance for the firms that have undergone the mergers. Findings – The analysis reveals that the impacts of mergers on the several measures of efficiency that have been evaluated have all been negative. Social implications – If the efficiency motive has been primary in influencing merger approvals, then the past mergers approved have led to inefficiencies, corresponding welfare losses for the American consumer, and the mergers of communication common carriers have not been in the public interest. On the other hand, given the inefficiency outcomes, views that the quiet life, hubris and a quest for possible market power have motivated the mergers cannot be discarded. Originality/value – The results have considerable salience across industry segments and geographies where mergers are being considered and evaluated, since they call into question the strategic and public policy logic behind merger consummation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png info Emerald Publishing

Is the efficiency doctrine valid? An evaluation of US local exchange telecommunications company mergers

Sumit K. Majumdar; Rabih Moussawi; Ulku Yaylacicegi
info , Volume 12 (5): 19 – Aug 17, 2010
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Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
1463-6697
DOI
10.1108/14636691011071149
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to evaluate the impact of the various mergers of the local exchange companies in the USA. Design/methodology/approach – The authors evaluate all of the mergers that took place between 1988 and 2001 on several measures of performance for the firms that have undergone the mergers. Findings – The analysis reveals that the impacts of mergers on the several measures of efficiency that have been evaluated have all been negative. Social implications – If the efficiency motive has been primary in influencing merger approvals, then the past mergers approved have led to inefficiencies, corresponding welfare losses for the American consumer, and the mergers of communication common carriers have not been in the public interest. On the other hand, given the inefficiency outcomes, views that the quiet life, hubris and a quest for possible market power have motivated the mergers cannot be discarded. Originality/value – The results have considerable salience across industry segments and geographies where mergers are being considered and evaluated, since they call into question the strategic and public policy logic behind merger consummation.

Journal

info – Emerald Publishing

Published: Aug 17, 2010

Keywords: Economic performance; Regulation; Telecommunications; United States of America; Acquisitions and mergers

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