The Empirical Analysis of Merger Regulation and its Performance of the Fair Trade Act
Date Issued
2008
Date
2008
Author(s)
Liang, Ya-Chin
Abstract
Mergers may improve enterprises’ performance through economies of scale or economies of scope. However, merger may cause the rearrangement of market structure, result in monopolies or facilitate concerted actions in relevant markets, thus reduce competition as well. According the Fair Trade Act, to maintain free and fair competition, any merger which acrosses specific threshold should be submitted to the Fair Trade Commission (FTC) for review in advance. Enterprises shall not proceed to merge until the FTC approves it or not to block it. Using a research sample of mergers of 5 industries approved by the FTC between 1992 and 2006, this study examines the post-merger operating performances and their short-term and long-term effects of the merging parties. The results include: (1) In the long run, the post-merger enterprises may improve the performance of rate of gross profit, ROE and ROA. (2) The level of market power may influence the post-merger performance. With the higher market power, the firm may obtain higher rate of return. (3) Industry-type plays an important role in enterprises’ performance. Industries with monopolistic or oligopolistic market structure, such as broadcasting and programming or telecommunications, usually have better operating performances. Meanwhile, financial intermediations which compete vigorously the last few years have lower ROE and ROA.
Subjects
merger
Fair Trade Act
competiton
operating performance
market power
Type
thesis
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