Mergers, capital gains, and productivity: Evidence from U.S. telecommunications mergers

The article examines the effects of two horizontal mergers on the performance of the respective operating companies. The effects of the mergers are investigated by comparing the performance of the merging companies with a control group of nonmerging companies and also the performance of the merging companies before and after merger. The article concludes that mergers did not produce net economies of scale, did not lead to substantial productivity growth or cost reduction, and did not generate significant shareholder wealth effects. It is, to the authors' knowledge, the first study of mergers that combines the analysis of productivity and cost effects, on one hand, with an examination of the effects on financial variables, on the other hand.