The Impact of Merger-Related Regulations Using Exact Distributions of Test Statistics

Abstract

In Schipper and Thompson [1983] (henceforth ST), we estimated a pooled cross-section, time-series model of the return-generating process for the common stock in a sample of related firms. Some of the test statistics reported, based on linear constraints across estimated coefficients, are quadratic forms in the sample covariance matrix. Under the structure and assumptions of the model, these test statistics have asymptotic chi-squared distributions (as the number of time-series observations goes to infinity). In that paper, we did not discuss the exact distributions of these test statistics. In this paper, we show that under the assumption of normality of residuals, the test statistics reported in ST involving asymptotic chisquared distributions have convenient finite sample distributions which can be used to test some of the hypotheses examined there.1 In doing so we reaffirm that the average impact on shareholder wealth of the Williams Amendments was negative and statistically significant for the