An accounting examination of the long-run performance of Greek acquiring firms

Abstract

This paper examines empirically the impact of M&As on the post-merger performance of Greek merger-involved firms in the long-run perspective. Τhe post-merger performance of an extensive sample of acquiring listed firms is investigated with accounting data analysis. For the purpose of the study, an explanatory set of 24 financial ratios (divided into five main groups) is employed, in order to measure firms' post-merger performance. The results revealed that six out of all the examined ratios had decreased and showed, in general, deterioration in several business functions of merger-involved firms' performance in the post-merger period.

Mergers, taxation and accounting performance: Some evidence from Greece

“…Also, the study results are not consistent with the results that found an improvement in accounting or profitability measures (Cosh et al, 1980;Parrino and Harris, 1999;Mylonidis and Kelnikola, 2005;Vijayakumar and Sridevi, 2013;Halimahton et al, 2014;Muhammad and Zahid, 2014;Erdogan and Erdogan, 2014). Furthermore, the study results for the Greek market, since there is no significant profitability improvement, do not support the hypothesis of market power (Lubatkin, 1983;Pazarskis et al, 2011). According to this approach, the market power that was gained by the acquirer after the merger or the acquisition should increase the new firm"s profit margins and therefore, its profitability (Table 3).…”

“…As earlier mentioned, some Greek studies supported a partial improvement to the corporate performance after the M&As action (Mylonidis and Kelnikola, 2005;Agorastos et al, 2012), while others claimed that there was a deterioration in the post-merger firm performance (Pazarskis et al, 2011;Pantelidis et al, 2014). Furthermore, regarding the taxation effects and merger decision several studies have been conducted over time: Auerbach and Reishus (1987a) examine the impact of taxes on the frequency of mergers and acquisitions in the United States in 1968 to 1983 on a sample of 318 large mergers and acquisitions.…”

“…According to Spyrou (1998), Michailidis et al (2006) and Artikis et al (2010), the Greek market index (the General Market Index of the Athens Exchange) needs to be redefined in terms of the way it is structured, because it does not represent the Greek stock market well (Pazarskis et al, 2011).…”

“…Thus, an adoption of additional and combined measures is believed to be necessary in order to provide a holistic view of the accounting performance of a firm (Pazarskis et al, 2011;Agorastos et al, 2012;Pantelidis et al, 2014).…”

“…The examined increases or decreases in equity values are typically attributed to some unmeasured source of real economic factors (such as synergy) or a general and not well established idea (as management past decisions) (Healy et al, 1992;Pazarskis et al, 2011). Within this aspect, Jensen and Ruback (1983) argued that: "These post-outcome negative abnormal returns are unsettling because they are inconsistent with market efficiency and suggest that changes in stock prices overestimate the future efficiency gains from mergers.…”