An Analysis of Divestiture Effects Resulting from Deregulation

Andrew H. Chen · Larry J. Merville

25 citations0/0 files storedThe Journal of Finance

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Corporate Finance and Governance Financial Markets and Investment Strategies Merger and Competition Analysis

Abstract

ABSTRACT Capital market data were used to examine the divestiture effects pertaining to deregulation, the dropping of antitrust charges, and the reversing of the co‐insurance effect associated with the recent breakup of AT&T. The empirical results of the study indicate that significant economic events took place during the breakup process, which led to transfers of wealth from various parties to the securityholders of AT&T. The results also indicate that the buffering effect of regulation was reduced as AT&T went through the total deregulation process. This is in accordance with Peltzman's prediction.

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References

1971The Theory of Economic Regulation 1985Using daily stock returns 2021The Theory of Economic Regulation 1976Toward a More General Theory of Regulation 1976The option pricing model and the risk factor of stock 1983Merger bids, uncertainty, and stockholder returns 1974Risk and return: The case of merging firms 1980Merger proposals, management discretion and stockholder wealth

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