Efficiencies from horizontal mergers: a cost approach

Abstract

Tests for efficiencies from horizontal mergers are made by comparing cost elasticities of relevant cost functions before and after mergers. While there is no evidence of such efficiencies among commercial banks, electrical equipment and electronic firms as well as business service firms provide same evidence of synergies. Efficiencies are studied in production costs, management costs and total costs. The evidence is consistent with the many studies that find that shareholders of acquiring firms are not hurt by acquisitions, and inconsistent with the findings of many industrial economists who conclude that, ex post, mergers do not benefit acquiring firms.