Impact of Industry Concentration on Acquirers Excess Returns in M&A Transactions in Developed Countries

There is no the unified evidence on industry concentration on bidder announcement abnormal returns on the U.S market. Also, there is no witness on investigation of interaction effects of concentration with bidder size and pre-deal ROE and their joint effect on returns. This article contributes to the literature by analyzing the standalone and multiplier effects of industry concentration on bidder returns. The study reveals that industry concentration has systematically increased over 73% of U.S. industries, and that average increase in concentration levels has reached 34% over the past decade. Based on 2009-2017 sample of 1,018 U.S. domestic mergers and acquisitions we found the strong negative and robust impact of industry concentration on bidder returns. The findings confirmed the mitigating effect of pre-deal ROE on concentration meaning that bidders in concentrated industries earn larger abnormal returns if they have higher pre-deal ROE. We also detected the reinforcing joint effect of bidder size on concentration meaning that large acquirers as opposed to smaller ones earn less returns in more concentrated industries. Besides, we found the reinforcing negative effect of target size and concentration meaning that buying larger companies in concentrated industries brings less value to the bidders.