Capital markets' assessment of airline restructuring following deregulation

The Airline Deregulation Act of 1978 propelled the industry into a constant state of change, even turmoil, that prevails 14 years later. The purpose of this paper is to examine the capital markets' reactions to the dramatic restructuring of the airline industry. The results of an event study of...

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Bibliographic Details
Published in:Applied economics 1992-10, Vol.24 (10), p.1097-1102
Main Authors: Kyle, Reuben, Strickland, Thomas H., Fayissa, Bichaka
Format: Article
Language:English
Subjects:
Acquisitions & mergers
Airline industry
Airlines
Capital market
Capital markets
Correlation analysis
Deregulation
Economic conditions
Economic models
Legislation
Manycompanies
Reorganization
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Summary:The Airline Deregulation Act of 1978 propelled the industry into a constant state of change, even turmoil, that prevails 14 years later. The purpose of this paper is to examine the capital markets' reactions to the dramatic restructuring of the airline industry. The results of an event study of 24 merger announcements indicates that stockholders of target firms experience positive abnormal returns of 14.5% over a three-day period around the merger announcement date. Bidding firms experience a 3.7% increase over the same time window. Clearly, the capital markets viewed this restructuring of the industry as positive.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036849200000002