Antitrust policy for mergers to facilitate global competitiveness

This study examined horizontal mergers within the manufacturing sector to determine the impact on global competitiveness using the profit/sales ratio, which is the dual of the cost/profit ratio. This ratio is used as a proxy for merger efficiency.;Specifically, the difference between pre- and post-merger ratios was examined to determine the significance of the merger activity. The statistical tool used was the paired T-test for each of 56 firms. The firms were selected from the Federal Trade Commission (FTC) report on mergers and acquisitions, which covers data on all mergers from 1948 to 1979. The data for 56 firms, that were contained in the FTC report, were gathered from their respective financial reports as they appeared in Moody's Industrial Manuals, published by Dunn & Bradstreet. These reports are the same reports that are submitted to the Securities and Exchange Commission (SEC). Therefore, there is an inference of conformance with standard accounting practices, as promulgated by the Financial Accounting Standards Board (FASB).;It was determined that there is no greater correlation of efficiency between firms with the same Standard Industrial Classification (SIC) code than with other horizontally merging firms in the manufacturing sector. According to current literature, it can not be said with any degree of certainty that horizontal mergers are accomplished solely as a result of relaxed Justice Department enforcement policy. The impact of relaxed Justice Department policy towards merging firms requires more investigation and research to determine factors that would provide a direct correlation between the merger decision and antitrust policy.;In addition, although this study recognizes that there is no statistically significant cost efficiency between horizontally merging firms in the period subsequent to the merger activity, there could be other factors contributing to the lack of efficiency besides solely the merger activity. For example, many of the merging firms are engaged in more than one line of business. Using line of business data from a multiple product organization that provides a combined financial report does not let one analyze the impact of the specific line of business that was involved in the merger.;The type of research used in this study was exploratory comparative research using secondary data to test the proposition that horizontal mergers lead to increased cost efficiencies. A quasi-experimental design was used to examine various factors that might detect specification error. This design included a (1) pre- and post-merger test on a sample of 56 firms; (2) a disaggregation of the sample to determine if there was a greater statistical correlation in the efficiency between firms with the same standard industrial classification (SIC) and those with different SIC codes; (3) a comparison of the results of the T-tests with the results of the pre- and post-merger findings of Somi Seong (1989), in her dissertation; (4) an examination of the professional research literature on economic and industrial organization theory as applied to antitrust policy on mergers; and (5) an examination of ratio analysis as an appropriate specification for merger analysis as compared to, and in contrast with, profitability and market share.;Finally, because of other motives for mergers, that are not based on efficiency, more research must be done to isolate the cause and effect relationship of efficiency, which this study was not able to accomplish for the reasons stated.;Recommendations include more research in the areas.