Deregulation, Competition and Merger Activity in the U.S. Telecommunications Industry
SMC Affiliated Work
School of Economics and Business Administration
Publication / Conference / Sponsorship
26th Australasian Finance and Banking Conference
Using the 1996 Telecommunications Act as a natural experiment, I examine the role of competition in “how” economic shocks drive industry-level clustering of merger activity and “who buys whom?” In the telecom industry, deregulation opened both the local and long-distance markets to competition from new communication technologies, driving significant increases in IPO and merger activity. My findings support the view that the increase in merger activity following the 1996 deregulation was an efficiency-improving restructuring response to increased competition from deregulation and technological change, and not to increased misvaluation. The economic shocks from deregulation and technological change drive merger activity by increasing industry competition. I find no significant relationship between the level of merger activity and stock market misvaluation. I find evidence systematically relating telecom firms’ performance and merger characteristics; pre-1996 deregulation levels of efficiency and leverage show up as important determinants of an incumbents’ survival and/or merger fate; the more efficient and less leveraged incumbents are more likely to be the acquirers than the targets in mergers involving two incumbents.
Mergers, Deregulation, Technological Change, Competition, Restructuring, Efficiency, Misvaluation
Business | Economics
Okoeguale, K. (2013). Deregulation, competition and merger activity in the U.S. telecommunications industry (June 30, 2015). Paper presented at the 26th Australasian Finance and Banking Conference.
Okoeguale, Kevin. Deregulation, Competition and Merger Activity in the U.S. Telecommunications Industry (2015). 26th Australasian Finance and Banking Conference. 10.2139/ssrn.2049491 [proceeding]. https://digitalcommons.stmarys-ca.edu/school-economics-business-faculty-works/196