HORIZONTAL MERGERS AND THEIR EFFECT ON SHAREHOLDERS VALUES: THE CASE OF AIRLINE INDUSTRY

The current paper makes use of event study methodology to scan whether horizontal mergers alter the value of the acquiring firm. Two models have been estimated in order to examine the biased of the findings with the use of different models. However, both AAR and CAAR obtained from both models were on average the same indicating that results are unbiased to model choice. In general the results indicated that in most markets are efficient since no significant effect on the return was found. The results are more in line with the European studies where they also found insignificant returns for the bidder firms. In terms of event window the study utilised several different windows so as to examine also the biased of the results on the the span of the event period. Again the study found no evidence of cumulative and abnormal return in any event window, apart for only one merger. In this specific merger the study found evidence of cumulative and abnormal returns only when event window was quite small. At a longer window the abnormal returns seems to disappear. The latter provided evidence of market inefficiency in the short run for the given market, which in turns suggest that investors can gain abnormal returns with the use of publicly available information.