Are Mega-Mergers Anticompetitive? Evidence from the First Great Merger Wave

In the first time-event analysis of the great merger wave of 1897-1903, we find that the consolidations created value for merger participants of 12% to 18%. We next find that the competitors suffered significant value losses inconsistent with conventional monopoly behavior (i.e., trust-induced output reductions and price increases). This result might be explained by apprehensions of trust predation rather than expected efficiency, but further analysis suggests that this is unlikely. Revelation of trust membership or prior stock market mispricing are also unlikely alternative explanations. On balance, therefore, the evidence indicates that these mergers were generally motivated by more efficient operations, rather than monopoly power.