Mergers and acquisitions in the telecommunications industry: Myths and reality

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This paper investigates how market participants react to mergers and acquisitions (M&As) involving telecommunications companies. The empirical evidence suggests that such activities convey bad news to the market. This is consistent with the synergy trap hypothesis and extant empirical findings of value-reducing diversification strategies in recent literature. The evidence also indicates that a cross-border, rather than a domestic M&A deal, is the main driver of the negative market reaction. Further, our evidence of negative impacts on the bidder's business after an M&A reinforces our main finding that market participants, on average, perceive M&A activities to be detrimental to shareholder value. This suggests that value creation or synergy through an M&A deal is not warranted even though it can generate an increase in size of the firm.
Publisher
ELECTRONICS TELECOMMUNICATIONS RESEARCH INST
Issue Date
2002-02
Language
English
Article Type
Article
Citation

ETRI JOURNAL, v.24, no.1, pp.56 - 64

ISSN
1225-6463
URI
http://hdl.handle.net/10203/81279
Appears in Collection
MG-Journal Papers(저널논문)
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