The effects of M&As in highly concentrated domestic vis-à-vis export markets: By the example of Russian metal industries

Event studies are employed in order to assess the impact of external shocks and internal decisions not only on the value of a company that is directly affected by the event but also on the environment that is influenced by a company's decision, including competition in the product market. The impact of a merger on market competition depends on before-merger market structure and competition. Goal of this study is to test the ability of financial markets to take into account initial competition conditions and the applicability of event study method for the assessment of merger effects for different product markets (export vs. domestic, more or less competitive), and for different types of mergers (horizontal vs. vertical). We examine deals among large companies, supplying in two markets with a substantially different degree of competition, and analyze the impact of a merger on industrial customers as well as merging companies and their competitors by the example of Russian ferrous and non-ferrous metal industries from 1999 to 2011. Two findings distinguish this paper from others in the contemporary literature: the application of event study methodology for the assessment of competitive effects of mergers involving Russian companies and the comparison of competitive and efficiency effects of vertical and horizontal mergers between participants of the same product market. The main result is that event studies are sensitive to the structure and the organization of product market affected.