Abstract:This article examines the value-added phenomenon of Malaysian horizontal merger and acquisition activities (M&A) in the long run for the period 1994-2010. In this regard, this article used economic value-added (EVA) approach and cost-efficiency approach (stochastic frontier analysis (SFA)) to investigate synergistic benefits. The findings suggest that bidder firms experience no significant improvement in operating and financial efficiencies in the long run. Specifically, the operating performance of bidder fir… Show more
“…Devos et al, () and Takechi, () argue that resulting companies may improve their technical efficiency by increasing their turnover, by getting bidders to work together to achieve targets and by engaging in research and development (R&D) thereby gaining from asset complementarities and improved operations. It is expected that the shareholders of both target and bidder firms will benefit from the technical efficiency gains (Aik et al , , ; Masoumi et al , ), suggesting endogeneity between anticipated and actual technical efficiency improvements in terms of the firms’ market value and earnings per share (Fee and Thomas, ; Gupta, ).H2: M&As in Nigeria yield higher value creation in resulting companies due to synergistic gains created by a feedback process between technical efficiency and value creation due to the amalgamation .…”
There is a growing literature on how the beneficial impacts of horizontal mergers and acquisitions (M&A) should be measured. Thus far, however, there have been few studies addressing endogeneity between technical efficiency and value creation: they tend to present a bidirectional and simultaneous relationship. This research contributes to the debate by investigating the impact of voluntary horizontal M&A on these metrics in Nigeria between 1995 and 2012, in light of the individual performance of bidders, targets, and the resulting corporate companies. First, technical efficiency, technology gap ratio, and returns‐to‐scale estimates were computed based on a meta‐frontier DEA approach, together with a set of contextual variables that encompass performance indicators which reflect the value creation process. Then, robust regressions were used to discriminate these efficiency estimates in terms of such business‐related variables, correcting for endogeneity and controlling for industry and trend effects. The results reveal that these contextual variables significantly impact virtual efficiency and returns‐to‐scale levels, and that there is a trade‐off between efficiency and value creation at some point in the merging process. Managerial implications are derived.
“…Devos et al, () and Takechi, () argue that resulting companies may improve their technical efficiency by increasing their turnover, by getting bidders to work together to achieve targets and by engaging in research and development (R&D) thereby gaining from asset complementarities and improved operations. It is expected that the shareholders of both target and bidder firms will benefit from the technical efficiency gains (Aik et al , , ; Masoumi et al , ), suggesting endogeneity between anticipated and actual technical efficiency improvements in terms of the firms’ market value and earnings per share (Fee and Thomas, ; Gupta, ).H2: M&As in Nigeria yield higher value creation in resulting companies due to synergistic gains created by a feedback process between technical efficiency and value creation due to the amalgamation .…”
There is a growing literature on how the beneficial impacts of horizontal mergers and acquisitions (M&A) should be measured. Thus far, however, there have been few studies addressing endogeneity between technical efficiency and value creation: they tend to present a bidirectional and simultaneous relationship. This research contributes to the debate by investigating the impact of voluntary horizontal M&A on these metrics in Nigeria between 1995 and 2012, in light of the individual performance of bidders, targets, and the resulting corporate companies. First, technical efficiency, technology gap ratio, and returns‐to‐scale estimates were computed based on a meta‐frontier DEA approach, together with a set of contextual variables that encompass performance indicators which reflect the value creation process. Then, robust regressions were used to discriminate these efficiency estimates in terms of such business‐related variables, correcting for endogeneity and controlling for industry and trend effects. The results reveal that these contextual variables significantly impact virtual efficiency and returns‐to‐scale levels, and that there is a trade‐off between efficiency and value creation at some point in the merging process. Managerial implications are derived.
“…We eliminated the acquisitions of shares less than 25 per cent because they may not represent economically significant events (Santos, Errunza, & Miller, 2008). Second, similar to other studies (e.g., Aik et al, 2015;Narayan & Thenmozhi, 2014;Santos et al, 2008), we excluded announcements by companies in the financial sector as they subject to specific accounting and regulatory requirements. Third, we eliminated M&As by a company within one year of an earlier one.…”
Section: Datamentioning
confidence: 99%
“…Regarding the target company shareholder wealth effects, existing studies consistently report positive returns to the shareholders in the target company (e.g., Borges & Gairifo, 2013;Chaney, Lovata, & Philipich, 1991;Haleblian et al, 2009;Ismail & Krause, 2010;Kohli & Mann, 2012;Konigs & Schiereck, 2008;Mallikarjunappa & Nayak, 2013;Renze-Westendorf, Schiereck, & Zeidler, 2009). Another stream of literature on M&As pays attention to the post-merger operating performance of combined companies (e.g., Aik, Hassan, & Mohamad, 2015;Cornett & Tehranian, 1992;Ghosh, 2001;Healy, Palepu, & Ruback, 1992;Leepsa & Mishra, 2013;Mahmood & Rashidah, 2007;Ramaswamy & Waegelein, 2003;Sharma & Ho, 2002).…”
Motivated by the paucity of empirical studies examining the impact of mergers and acquisition (M&A) announcements on the acquiring firms' rivals, we made an attempt to uncover the spillover effect of M&A announcements on the stock market reaction of acquiring firms' rivals. Using a sample of 97 M&A announcements during the period from April 2014 to March 2016 and 179 rivals of acquirers, we found that acquiring firms and acquiring firms' rivals react positively to the announcement of M&As. The results of the disaggregated analysis suggest that horizontal M&As do not result in a significant positive reaction of acquiring firms' rivals. Therefore, this study does not support the collusion theory. We also found negative (insignificant) stock market reaction of acquiring firms' rivals upon the announcement of cross-border M&As. However, overall results show that acquiring firms' rivals react positively to the announcement of M&As. This significant positive reaction of acquiring firms' rivals goes in line with signalling theory. Thus, we argue that M&A announcements signal information regarding the growth potential of rivals, which results in positive stock market reaction of acquiring firms' rivals upon the M&A announcements.
“…On the other hand, to the best of author's knowledge, only the study by Khin, Lee, and Yee (2012) was conducted on long run SWE. There are a few studies on SWE of firms following domestic merger and acquisition (M&A) as well, for example, Peng and Isa (2012), Aik, Hassan, and Mohamad (2015), Shahar, Mohd, and Ishak (2016) and Mat Rahim and Ching Pok (2013).…”
Purpose: The purpose of this study is to investigate long run shareholders' wealth effect (SWE) of Malaysian acquiring firms following cross-border acquisition (CBA).
Methodology: Using buy-and-hold abnormal returns (BHAR) measure of SWE and Euclidean distance method for identifying matching firms, the study investigated 176 CBA deals of Malaysian acquiring firms for the years 2004-2015. Both parametric tests (such as conventional t-statistics, skewness adjusted t-statistics, bootstrapping skewness adjusted t-statistics and Multivariate of Analysis of Variance) and non-parametric statistical (such as Wilcoxon-Mann-Whitney test) tools were employed to analyze the data and test the hypotheses regarding the impact of CBA deals on acquiring firms' SWE.
Results: The research found that the SWE of acquiring firms is significantly positive in the shorter period while negative or mixed in the longer period. Furthermore, SWE is found to be different across several groups: (i) Shariah-complaint status firms vs. conventional firms (ii) level of control in target firm (such as major vs. minor acquisitions), (iii) Diversifying acquisition (for example, related vs unrelated acquisition). However, SWE does not differ from industry to industry.
Implications: This research presents unique empirical evidences related to long run SWE of Malaysian acquiring firms following CBA. The findings imply that CBA is more success in the longer period.
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