Abstract:
This study investigates the stock market effects of airline mergers and acquisitions that took place in the U.S. during the period 1985-2001 on rival domestic airlines. We document significant positive price reactions for the target firms, insignificant reactions for the bidders, and marginally significant negative effects for a portfolio of rival firms on the day of the merger announcement. Our empirical evidence further suggests that the bidder’s market share relative to that of the rival, the bidder’s pre-merger market position, and the change in the bidder’s market share post-merger are determinants of the magnitude of the rival’s stock price reaction.