Monopoly Enterprises Welfare Effects Of Horizontal Mergers Under The Government Regulation

This paper is conducted in the context of transition economies when a planned economy changes to market economy in China. In this context, Chinese industries, including the control of monopoly industries and many other market-oriented reform measures show significant progressive features. A lot of researchers focused on M & A motives, performance, strategies and procedures. But analysis on the causes of economic restructuring, industry characteristics and government regulation of mergers and acquisitions has just begun.The object of this paper involves government regulation and welfare effects of mergers and acquisitions. The paper takes the power industry as an example. Firstly, the paper describes the motives of mergers and acquisitions, the social effects of mergers and acquisitions, government regulation of M&A and relationships among the integration of the literature. Then the paper introduces the mergers and acquisitions background of Chinese electric power industry and the M&A characteristics of electricity. We establish two models from the effects of enterprise after the M&A and the welfare effects on society. The first model is the cost of decreasing with the size of the industry effects of M & A. We can deduce through the models that M & A front n side of the main companies can speed up the process of market concentration in relevant M & A. The enterprise can expand the production scale and improve their own efficiency. The second model is the cost of decreasing the scale of the welfare with government regulation in the merger process. Through deducing, with certain conditions, the cost of decreasing the size of government regulation in mergers and acquisitions will help to improve the welfare occurring. Validated, the power industry is in line with the conditions of these models. Therefore, we select 68 cases in the power industry.The samples of horizontal mergers are in 8 years. We measure the sample data regression analysis. We conclude that eligible acquisition can improve the industry concentration and improve social welfare.This paper analyzes that M & A enterprises which under control of the state-owned generated effects of market structure and welfare effects. We analyze the characteristics of the power industry mergers and acquisitions.We find that the electricity industry M & A activity had a positive effect in the year after the M & A and within one year. In the meantime, M & A increased industrial concentration, improved consumer welfare. The paper reveals such characteristics of state-owned enterprises how to reform. The policy implication is that monopoly of state-owned enterprises should be carried out merger and reorganization to improve their own strength and to improve social welfare.