Chapter 9: Mergers and Efficiency: Theory, Empirical Evidence, and Competition Policy in Japan
9. Mergers and eﬃciency: theory, empirical evidence and competition policy in Japan* Hiroyuki Odagiri Economic consequences of mergers have always been one of the major research interests for Dennis Mueller. When he edited a special issue on mergers in the International Journal of Industrial Organization, he stated that With respect to mergers . . ., disagreement exists over (1) whether mergers are adequately explained by a proﬁts maximization assumption, (2) whether mergers generate net private returns which are positive, zero, or negative, (3) whether mergers generate social returns that go beyond their private returns, and if so what sign do they have, and (4) whether merger policy should stimulate more mergers, or try to curtail them (Mueller, 1989, p. 1). Being skeptical of the eﬃciency arguments of mergers, he said that ‘Whether the large number of unproﬁtable mergers is due to managerial hubris or managerial pursuit of goals other than stockholder welfare, these mergers arise because of the considerable discretion managers have in this area. Policies to reduce the number of eﬃciency reducing mergers should seek to curb managerial discretion’ (ibid., p. 7). Once he even proposed that ‘A policy for preserving this system without sacriﬁcing economic eﬃciency would be a ﬂat ban on mergers subject to an eﬃciencies defense’ (Mueller, 1986, p. 234). Whether or not one agrees with this recommendation, everyone would agree that these issues have recently become even more pertinent as mergers have become commonplace. This applies particularly well in Japan...
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