Is the efficiency doctrine valid? An evaluation of US local exchange telecommunications company mergers

Abstract

Purpose

The purpose of this paper is to evaluate the impact of the various mergers of the local exchange companies in the USA.

Design/methodology/approach

The authors evaluate all of the mergers that took place between 1988 and 2001 on several measures of performance for the firms that have undergone the mergers.

Findings

The analysis reveals that the impacts of mergers on the several measures of efficiency that have been evaluated have all been negative.

Social implications

If the efficiency motive has been primary in influencing merger approvals, then the past mergers approved have led to inefficiencies, corresponding welfare losses for the American consumer, and the mergers of communication common carriers have not been in the public interest. On the other hand, given the inefficiency outcomes, views that the quiet life, hubris and a quest for possible market power have motivated the mergers cannot be discarded.

Originality/value

The results have considerable salience across industry segments and geographies where mergers are being considered and evaluated, since they call into question the strategic and public policy logic behind merger consummation.

Citation

Majumdar, S.K., Moussawi, R. and Yaylacicegi, U. (2010), "Is the efficiency doctrine valid? An evaluation of US local exchange telecommunications company mergers", info, Vol. 12 No. 5, pp. 23-41. https://doi.org/10.1108/14636691011071149