The success of mergers in the 1920s. A stock market appraisal of the second merger wave

This paper examines the impact on acquiring firm shareholder wealth of mergers during the oligopoly merger wave of the 1920s. These acquisitions were relatively unregulated; the Securities and Exchange Commission did not exist and antitrust laws were only loosely enforced. Although the lack of financial market controls and the possibility of monopoly gains should have permitted acquiring companies to capture large take-over profits, stock price data on 134 firms indicate only modest success. The average profitability of an acquisition in the 1920s does not differ from the profitability resulting from mergers in the 1960s and 1970s, despite vast differences in the economic environments.