Defense industry mergers and monopoly power : analysis of abnormal earnings using the Edwards-Bell-Ohlson model
Loading...
Authors
Heisey, J. Mark
Subjects
defense
defense industry
mergers
monopoly
accounting models
defense industry
mergers
monopoly
accounting models
Advisors
Moses, O. Douglas
Owen, WaIter E.
Date of Issue
1997-12
Date
December 1997
Publisher
Monterey, California. Naval Postgraduate School
Language
en_US
Abstract
Recent defense industry consolidation has created several large defense firms. As a result of merger activity with their suppliers and competitors, these firms account for an increasing percentage of sales to the Department of Defense. This thesis investigated seven large defense industry mergers, involving 12 defense firms, to assess the effect of the mergers on the firms. Changes in a firms' anticipated abnormal earnings both premerger and post-merger were analyzed to determine whether the defense firms exhibit monopoly power. The merger process was divided into five stages. The Edwards- Bell-Ohlson (EBO) valuation model was used to create measures of firms' expected abnormal earnings at each stage. Each firm's resulting abnormal rates of return on equity were observed and analyzed between stages to track changes in assessments of expected abnormal earnings as the merger process proceeded. Major findings indicate that post-merger abnormal rates of return increased from premerger levels for all firms. These findings are consistent with defense firm earnings power and monopoly position increasing due to merger activity.
Type
Thesis
Description
Series/Report No
Department
Organization
Naval Postgraduate School (U.S.)
Identifiers
NPS Report Number
Sponsors
Funder
Format
viii, 132 p.;28 cm.
Citation
Distribution Statement
Approved for public release; distribution is unlimited.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.