Relaxation of Antitrust Regulations and Shareholder Returns: Evidence from the Korean Market*

This study examines the effects of the 2007 antitrust regulations on the value of acquiring firms engaged in mergers and acquisitions (M&A) in Korea. By employing a difference-in-differences model and analyzing 5-day cumulative average abnormal returns (CAR), the study reveals that horizontal acquisitions lead to increased shareholder returns. However, there is no indication that market power or cost efficiency are contributing factors. For chaebol firms, M&A significantly decreases firm value, likely due to tunneling. Subsample analyses suggest that managerial entrenchment causes this decline, while non-chaebol firms show no empirical support for the market power or cost efficiency hypotheses.