Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 31515
Impact of Mergers and Acquisitions on Consumers- Welfare: Experience of Indian Manufacturing Sector

Authors: Pulak Mishra, P V Kiran Kumar


In the context of introduction of deregulatory policy measures and subsequent wave of mergers and acquisitions (M&A) in Indian corporate sector since 1991, the present paper attempts to examine the welfare implications of this wave. It is found that M&A do not have any significant impact on consumers- welfare. Instead, consumers- welfare is significantly influenced by exports intensity, imports intensity, advertising intensity, technology related efforts, and past profitability of the firms. While the industries with higher exports orientation or greater product differentiation or better financial performance experience greater loss in consumers- welfare, it is less in the industries with greater competition from imports or better technology. Hence, the wave of M&A in Indian manufacturing sector in the post-liberalization era may not be a matter of serious concern from consumers- welfare point of view. Instead, in many cases, M&A can help the firms in consolidating their business and enhancing competitiveness, and this may benefit the consumers in the form of greater efficiency and lower prices.

Keywords: Mergers, acquisitions, concentration, welfare, IndiaJEL CodesÔÇöL1, L2, L4, L5

Digital Object Identifier (DOI):

Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 3309


[1] Agarwal, M. (2002), Analyses of Mergers in India, M. Phil Dissertation, University of Delhi, Delhi.
[2] Agarwal, M. and A. Bhattacharya (2006), Mergers in India: A Response to Regulatory Shocks, Emerging Markets Finance and Trade, 42(3), pp. 46-65.
[3] Banerjee, A. and E. W. Eckard (1998), Are Mega-Mergers Anticompetitive? Evidence from the First Great Merger Wave, RAND Journal of Economics, 29(4), pp. 803-827.
[4] Basant, R. (2000), Corporate Response to Economic Reforms, Economic and Political Weekly, 35(10), pp. 813-822.
[5] Beena, P. L. (1998), Merger and Amalgamations: An Analysis of the Changing Structure of Indian Oligopoly, Dissertation, Centre for Economic Studies and Planning, JNU, New Delhi.
[6] Beena, P. L. (2000), An Analysis of Mergers in the Private Corporate Sector, Working Paper No. 301, Centre for Development Studies, Kerala.
[7] Beena, P. L. (2004), Towards Understanding the Merger Wave in the Indian Corporate Sector - A Comparative Perspective, Working Paper No. 355, Centre for Development Studies, Kerala.
[8] Beena, P. L. (2008), Trends and Perspectives on Corporate Mergers in Contemporary India, Economic and Political Weekly, 43(39), pp. 48-56.
[9] Beeslay, M. E. (1973): "Mergers and Economic Welfare," in Mergers, Takeovers and the Structure of Industry: Ten Papers on Economics, Law, Rules, The Institute of Economic Affairs, London.
[10] Breusch ,T. S. and A. R. Pagan (1980), The Lagrange Multiplier Test and its Applications to Model Specifications in Econometrics, Review of Economic Studies, 47(1), pp. 239-253.
[11] Chandrasekhar, C. P. (1999), "Firms, Markets and the State: An Analysis of Indian Oligopoly", in A. K. Bagchi (Eds.), Economy and Organization- Indian Institutions under Neo Liberalized Regime, Sage Publications, New Delhi.
[12] Chatterjee, S. (1986), Types of Synergy and Economic Value: The Impact of Acquisitions on Merging and Rival Firms, Strategic Management Journal, 7(2), pp. 119-139.
[13] Chen, C. and C. Findlay (2003), A Review of Cross-border Mergers and Acquisitions in APEC, Asia-Pacific Economic Literature, 17(2), pp. 14- 38.
[14] Cowling, K. and D. C. Mueller (1978), The Social Costs of Monopoly Power, Economic Journal, 88(352), pp. 724-748.
[15] Cowling, K. and D. Mueller (1981), The Social Costs of Monopoly Revisited, Economic Journal, 91(363), pp., 721-725.
[16] Church, J. and R. Ware (2000), Industrial Organization: A Strategic Approach, Irwin McGraw-Hill, Boston.
[17] Das, N. (2000), A Study of the Corporate Restructuring of Indian Industries in the Post-New Industrial Policy Regime - The Issue of Amalgamations/Mergers, Unpublished Ph.D. thesis Submitted to University of Calcutta, Calcutta.
[18] Dasgupta, P. (2004), Establishing an Effective Competition Policy System: the Challenges Facing India in Implementing its New Competition Law, presentation made at the WTO/UNESCO/ASCI Regional Seminar for Asia and Pacific Economies on Competition Policy, Development and the Multilateral Trading System, Hyderabad, India, 6-8 October.
[19] De Guevara, J. Fern├índez, J. Maudos, and F. Pérez, (2005), Market Power in European Banking, Journal of Financial Services Research, 27(2), pp. 109-138.
[20] Dixit, A. and N. Stem (1982), Oligopoly and Welfare: A Unified Presentation with Application to Trade and Welfare, European Economic Review, 19(1), pp., 123-143.
[21] Ghose, A. (1975), Concentration and Controls in the Indian Industry, Journal of Industrial Economics, 23(3), pp. 203-22.
[22] Gisser, M., (1986), Price Leadership and Welfare Losses in U.S. Manufacturing, American Economic Review, 76(4), pp., 756-767.
[23] Gisser, M., (1989), Price Leadership and Welfare Losses in U.S. Manufacturing: Reply, American Economic Review, 79, pp., 610-613.
[24] Goldar, B. and S. C. Aggarwal (2004): Trade Liberalization and Price- Cost Margin in Indian Industries, Working Paper No. 130, Indian Council For Research On International Economic Relations, New Delhi.
[25] Goldberger, A. S. (1991), A Course in Econometrics, Harvard University Press, Cambridge.
[26] Gopinath, S (2007), Overseas Investment by Indian Companies - Evolution of Policy and Trends, RBI Bulletin, 54(2), pp. 235-342.
[27] Gujarati, D. N. and Sangeeta (2007), Basic Econometrics, Tata McGraw Hill Publication, New Delhi.
[28] Hannah, L. (1983): The Rise of the Corporate Economy, Cambridge University Press, Cambridge.
[29] Harberger, A. (1954), Monopoly and Resource Allocation, American Economic Review, 44(2), pp. 77-87.
[30] Hausman, J. A, (1978), Specification Tests in Econometrics, Econometrica, 46(6), pp.1251-1271.
[31] Kambhampati, U. S. (1996), Industrial Concentration and Performance; A Study of the Structure, Conduct and Performance of Indian Industry, Oxford University Press, New Delhi.
[32] Khanna, S. (1997), Industrial Deregulation and Corporate Restructuring: Understanding India's First Merger Wave, Mimeo, Indian Institute of Management, Calcutta.
[33] Krueger, A. O. (1974), The Political Economy of Rent Seeking Behaviour, American Economic Review, 64(3), pp. 291-303.
[34] Kumar, N. (2000), Mergers and Acquisitions by MNEs: Patterns and Implications, Economic and Political Weekly, 35(32), pp. 2851-2858
[35] Levin, D. (1990), Horizontal Mergers: The 50-Percent Benchmark, American Economic Review, 80(5), pp. 1238-45.
[36] Mantravadi, P. and A. V. Reddy (2008), Post-Merger Performance of Acquiring Firms from Different Industries in India, International Research Journal of Finance and Economics, 22, pp. 193-204.
[37] Mishra, P. (2005), Mergers and Acquisitions in the Indian Corporate Sector in the Post-Liberalization Era: An Analysis, Unpublished Ph.D. Thesis, Vidyasagar University, West Bengal.
[38] Mishra, P. (2006), Mergers Acquisition Market Structure and Industry Performance: Experience of Indian Pharmaceutical Industry, Review of Development and Change, 11(2), pp. 135-164.
[39] Mishra, P. and T. Chandra (2010), Mergers, Acquisitions and Firms- Performance: Experience of Indian Pharmaceutical Industry, Eurasian Journal of Business and Economics, 3(5), pp. 111-126.
[40] Mitchell, M. L. and J. H. Mulherin, (1996), The Impact of Industry Shocks on Takeover and Restructuring Activity, Journal of Financial Economics, 41(2), pp. 193-229.
[41] Nayyar, D. (2007), The Internationalization of Firms from India: Investments, Mergers and Acquisitions, SLPTMD WP No. 004, Department of International Development, QEH, University of Oxford.
[42] Nelson, R. L. (1959), Merger Movements in American Industry, 1895- 1956, Princeton University Press, Princeton.
[43] Posner, R. A. (1975), The Social Costs of Monopoly and Regulation, Journal of Political Economy, 83(4), pp. 807-827.
[44] Porter, M. E. (1985): The Competitive Advantage, The Free Press, New York.
[45] Pratten, C. F. (1971), Economies of Scale in Manufacturing Industry, Cambridge University Press, Cambridge.
[46] Roy, M. (1999), "Mergers and Takeovers: The Indian Scene during the Nineties" in A. K. Bagchi (Eds.), Economy and Organization- Indian Institutions under Neo Liberalized Regime, Sage Publications, New Delhi.
[47] Saha, B. (2001), Investment Policy in India, Paper Presented in a Seminar Organized by CUTS Centre for International Trade, Economics and Environment, Jaipur, India.
[48] Scherer, F. M., A. Beckensten, E. Kaufer, and R. D. Murphy (1975), The Economics of Multi-plant Operation: An International Comparisons Study, Harvard University Press, Cambridge.
[49] Steiner, P. O. (1975), Mergers, Motives, Effects and Policies, University of Michigan Press, Ann Arbor, MI.
[50] Shelton, L. M. (1988), Strategic Business Fits and Corporate Acquisitions: Empirical Evidence, Strategic Management Journal, 9(3), pp. 279-287.
[51] Stigler, G. J. (1950), Monopoly and Oligopoly by Merger, American Economic Review, Papers and Proceedings, 42(2), pp. 23-34.
[52] Venkiteswaran, N. (1997), Restructuring of Corporate India: The Emerging Scenario, Vikalpa, 22(3), pp. 3-13.
[53] White, H. (1980), A Heteroscedasticity Consistent Covariance Matrix Estimator and a Direct Test of Heteroscedasticity, Econometrica, 48 (4), pp. 817-818
[54] Willner, J. (1989), Price Leadership and Welfare Losses in U.S. Manufacturing: Comment, American Economic Review, 79, pp., 604- 609.