he testable framework is developed by a research that is previously published,outlined by the part of this paper. The aim of the theory is to examine the company specific elements describing the wealth effects evidenced by competitors following the disclosure of merger between Arcelor and Mittal.
Analysts explain the relationship between the rise in the rivals stock price when there is a disclosure of a merger with that of something good happening in return. Nevertheless there are dissimilar justifications of what this “good” is. They have further quoted theories. They are Collusion theory( Stigler, 1964; Eckbo,1983; Eckbo and Wier, 1985; Mullins et. al., 1995; Sharur, 2004), Buyer power (Robinson, 1933; Galbraith, 1952; Stillman, 1983; Snyder, 1996; Fee and Thomas, 2004) and Productive efficiency (Eckbo, 1983; Stillman, 1983; Sharur, 2004). In the stock markets, these theories have numerous justification for the same event.
The collusion theory (Eckbo, 1985) presumes the number of key players in the industry dwindle when firms experience wealth effects, which makes it simple for companies to develop a cartel(Stigler, 1964; Eckbo, 1983). Academic research earlier carried out found no aid for this theory(Eckbo, 1983; Stillman, 1983; Fee and Thomas, 2004; Sharur, 2004). One possible reason as to why Eckbo and Stigler obtained no support is that the rival companies might have been diversified conglomerates and meagrely affected by an event in the minor industry(McAfee and Williams, 1988). We can have an arguement that the sequence of the end result obtained by Eckbo(1983) and Eckbo and Wier(1985) is unstable with anticompetitive mergers(Schuman, 1989).
This theory assumes that a merger could guide to monopolistic or oligopsonistic competition (Robinson, 1933; Galbraith, 1952).If there are only few buyers and there are many sellers, then the sellers are being paid off by the buyers against eachother. Buyers can then order concessions like reduction in the price, specific delivery times,dates or product varities, threatening to switch to another supplier if the present one does not want to deliver. A merger decleration will result inthe positive wealth impact for the opponent if the theory holds good(Galbraith, 1952; Snyder, 1996; Stillmann, 1983; Fee and Thomas, 2004). Nonetheless the drawback for a victorius oligopsonistic organisationis the number of members involved and the parameters adjusting the suppliers condition.
