THE SOURCES OF RAILROAD MERGER GAINS: EVIDENCE FROM STOCK PRICE REACTION AND OPERATING PERFORMANCE

Several empirical studies have investigated the effects of mergers on shareholder wealth. The results of these studies seem to support the conclusion that mergers create gains to merging firms; however, the source of the gains remains unclear. The aim of this study is to provide empirical evidence on the potential sources of gains associated with railroad mergers. Due to deregulation, the U.S. railroad industry has undergone widespread reorganization and consolidation resulting in fewer but larger firms in the industry. Large mergers have given rail monopolies or near monopolies to large regions of the U.S. Consequently, a few large railroads are responsible for a high percentage of the entire industry's total revenues. This article examines stock market reactions to railroad mergers to test whether railroads' pursuit to become larger is motivated by efficiency gains or exercise of market power.

Language

  • English

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Filing Info

  • Accession Number: 00800381
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Oct 14 2000 12:00AM