The effect of merger and consolidation activities on the efficiency of electricity distribution regions in Turkey

In this study, we analyze the efficiency performances of Turkish electricity distribution companies throughout 2002 and 2009 in the stochastic frontier analysis (SFA) framework. Our more specific goal is to measure how the efficiency performances of the electricity distribution regions were affected by the mergers between distribution regions occurred in 2005. The results demonstrate that efficiencies of the companies serving to mostly the residential customers are higher than those of other companies. However, the positive impact of residential customers on the efficiencies decreased significantly following the mergers between electricity distribution companies. In contrast, the positive impact of higher customer density on efficiency also decreased, but insignificantly following the restructuring activities in the market in 2005. Our study also witnesses that the positive impact of the mergers on the efficiencies decreases as the proportion of sales to residential customers in regions increases. In contrast, the restructuring activities of 2005 increased equally the efficiencies of the companies serving in the regions with higher and lower customer densities. - Highlights: • We analyze efficiency performances of Turkish electricity distribution companies. • The efficiencies of companies serving to mostly residential customers are higher. • Positive impact of residential customers on the efficiencies dropped after mergers. • Positive impact of customer density also decreased, but insignificantly. • Positive impact of mergers on efficiency decreases as sales to residents increase