Michael L. Polemis

The Short-Run Competitive Effects of Merger Enforcement

The main purposes of this paper are twofold. On the one hand, we calculate the sign of the effect of merger and phase II announcement (or decision/ referral) on merged firms’ stock value, while on the other hand, we investigate the possible short-run effects of the scrutinised mergers on competitors’ stock value. This paper extends the articles of Maynes and Rumsey,1 Cox and Portes,2 Duso et al3 and Barthodly et al 4 by introducing the simple return approach so as to overcome the infrequent trading phenomenon. It also infers short-run outcomes regarding the competitive effects of four major phase II mergers that have been notified to the Hellenic Competition Commission (HCC) during the period 2006–10. Despite its crucial importance, to the best of our knowledge the infrequent trading phenomenon has not been incorporated yet in an event study examination of the competitive effects of mergers on competitor’s stock value. Therefore, we argue that this kind of analysis will create strong benefits for other countries and their competition authorities as well.

The Use of Economic Tools in Merger Analysis: Lessons From US and EU Experience

The importance of economic analysis in the application of competition rules, especially in mergers, has increased over the last few years. Econometric techniques may help competition agencies to assess merger cases quickly and guide them towards better decision making when faced with the increasing complexity of markets. Agencies employ a lot of techniques, from very basic to sophisticated ones. Today it is widely accepted that the use of economics has improved the decisions of competition authorities when it is appropriate. This interest in economic evidence reflects the increasing use of economics and economic analysis in merger control as evidenced first in the US with the Merger Guidelines of 1984 and 1992. In the US the use of economic analysis is evident in the calculation of the significant lessening of competition (SLC) test. Under this test, a merger may have anticompetitive effects if it is likely to substantially lessen competition in the market. Under the aforementioned test, the investigation and assessment of a merger are more concerned with whether prices are likely to rise after the merger is consummated. In the EU, mergers are regulated by the Merger Regulation 139/2004, which came into force in January 2004. The law requires that firms proposing to merge apply for prior approval from the European Commission (EC); specifically, mergers that transcend national borders, and where the annual turnover of the combined business exceeds a worldwide turnover of over e5000 million and a Community-wide turnover of over e250 million, must notify and be examined by the EC. The Merger Regulation thus involves predicting potential market conditions which would pertain after the merger. The standard set by the law is whether a combination would significantly impede effective

The impact of economic growth on environmental efficiency of the electricity sector: A hybrid window DEA methodology for the USA

This paper estimates the efficiency of the power generation sector in the USA by using Window Data Envelopment Analysis (W-DEA). We integrate radial and non-radial efficiency measurements in DEA using the hybrid measure while we extend the proposed model by considering good and undesirable outputs as separable and non separable. Then in the second stage, we perform parametric and non-parametric econometric techniques in order to model the relationship between the calculated environmental efficiencies and economic growth in attaining sustainability. Our empirical findings indicate a stable N-shape relationship between environmental efficiency and regional economic growth in the case of global and total pollutants but an inverted N-shape in the case of local pollutants. This implies that attention is required when considering local and global pollutants and the extracted environmental efficiency scores. A clear message to policy makers and government officials is that climate change which calls for economic, environmental and social concern should be analyzed according to its dispersion and regional dimension.

Asymmetric Price Adjustment in the US Gasoline Industry: Evidence from Bayesian Threshold Dynamic Panel Data Models

Abstract This paper investigates the gasoline price adjustment to changes in the input cost price for a panel of 48 US states using a monthly data set covering the period 1994–2011. We build, for the first time, a non-linear threshold panel vector-error-correction model (PVECM) and propose efficient Markov chain Monte Carlo (MCMC) Bayesian techniques. Our findings indicate that states with high margin experience a slower adjustment and a more asymmetric response to input price cost shocks. Our results are robust to potential structural breaks in the threshold parameter, which is important as market conditions change over time and are very sensitive to production/consumption constraints. Lastly, we attribute fluctuations in the gasoline prices to input cost shocks, arguing that the peak responses occurring one month after the shock are short-lived.

Competition and efficiency in the MENA banking region: a non-structural DEA approach

ABSTRACT The goal of this article is to empirically assess the relationship between competition and efficiency in the banking sector of Middle East and North African (MENA) countries spanning the period 1997–2011. To measure the level of competition, the article estimates the non-structural indicator known as the H-statistic, while the level of bank efficiency is estimated through the nonparametric methodology of the Data Envelopment Analysis (DEA) and the Bootstrap Data Envelopment Analysis (BDEA), respectively. The empirical results are robust under six econometric methodologies, providing sufficient evidence for the presence of a one-way (negative) Granger causality, running from efficiency to competition. The empirical findings lead to the rejection of the ‘Efficient Structure Hypothesis’, implying that increases in competition do not precede increases in cost efficiency.

Empirical estimation of market power in Greece

The aim of this study is to estimate industry markups for 2-digit Greek manufacturing and services industries over the period 1970 to 2007. The empirical model estimates the markups following the Roeger (1995) methodology, separately for the two industries by using two different panel data econometric techniques. The results are robust revealing that Greek manufacturing and services industry operate in noncompetitive conditions. The findings also support the view that markup ratios vary significantly between the two industries, with services having higher markups than manufacturing.

Measuring market power in the Greek manufacturing and services industries

This paper investigates the level of market power in the Greek manufacturing and services industry over the period 1970–2007. Based on the Roeger methodology, we investigate the competitive conditions in the examined industries at a disaggregated level (two and three digit ISIC codes). The empirical results indicate that the Greek manufacturing and services industries operate in non-competitive conditions. Moreover, average mark-up ratios are heterogeneous across sectors, with manufacturing having higher mark ups on average than services. In contrast to other related studies, we provide sufficient evidence about the movements of mark-up ratios over time. According to our findings, the mark-up ratios in the manufacturing sectors are, on average, higher in the post European Union (EU) accession period (1982–1992), as a result of the merger wave in the manufacturing industry. However, this upward trend stopped within the period (1993–2007), and the relevant ratios have decreased substantially. The econometric results are quite robust when the Two Stage Least Squares (2SLS) and the bootstrap method are applied. Lastly, the results of our analysis have a number of interesting implications for policy makers and government officials in light of the recent financial crisis that hit Greece.

Trends in the European electricity markets: the case of Greece

Over the last decades, the structure of the European Union (EU) electricity sector has witnessed fundamental reform due to the increased complexity in interactions of political, economic and technological forces. The way electricity industry is structured is gradually evolving from vertically integrated state-owned monopolies to unbundled entities that favour free market mechanisms. The scope of this paper is to analyse the main aspects involved in the liberalisation process of the EU electricity industry and determine the progress made in less liberalised countries such as Greece, in terms of competition and regulatory reform. In order to empirically address this issue and inform policy makers, we study in-depth the case of the Greek electricity market by employing the structure-conduct-performance (S-C-P) paradigm.

Did financial crisis alter the level of competition in the EMU banks

The goal of this article is to empirically assess the level of competition in the European Monetary Union (EMU) banking sector. The empirical findings provide sufficient evidence in favour of a monopolistic competition regime. The industry structure of the banking sector seems to have been left unaltered after the adoption of the euro currency and the recent financial crisis with the estimated values of the H-statistic range between zero and unity.

The competitive conditions in the OECD manufacturing industry

The goal of this study was to assess the intensity of competition in the OECD manufacturing industry by using the Panzar and Rosse index over the period 1970–2011. For this purpose, we use the fully modified OLS method and second-generation unit root analysis to investigate the level of competition across two-digit manufacturing sectors. The results are robust and consistent with similar studies, leading to the rejection of perfect collusion and perfect competition, while providing evidence in favour of monopolistic competition. Similarly to other empirical studies, H-statistics are shown to be heterogeneous across manufacturing sectors. We argue that more concentrated sectors such as food and beverages, motor vehicles and furniture have low levels of H-statistic being thus less competitive than other industries (i.e. computers transportation equipment, printing and chemicals), where the H-statistic is closer to unity. Lastly, our analysis will be a useful policy tool to achieve structural micro-economic goals.