Does corporate performance improve after mergers?

Healy, Paul M.; Palepu, Krishna G.; Ruback, Richard S.

doi:10.1016/0304-405x(92)90002-f

Cited by 1,259 publications

(1,003 citation statements)

References 18 publications

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“…Therefore, the examination of accounting performance and the financial statements of a firm for the merger decision is a better and safer path (Healy et al, 1992;Chatterjee and Meeks, 1996;Ramaswamy and Waegelein, 2003;Marfo et al, 2013;Halimahton et al, 2014;Muhammad and Zahid, 2014;Oruc et al, 2014). Thus, the sample processing and examination in the study were Accounting data analysis with financial statements and ratios provide useful information regarding companies" merger decisions in general and more specifically on taxation issues (Auerbach and Reishus, 1987a;Landsman and Shackelford, 1995;Chatterjee and Meeks, 1996;Seetharaman et al, 2008;Becker and Fuest, 2011;Belz et al, 2013).…”

Section: Methodsology Accounting Measures-quantitative Variablesmentioning

confidence: 98%

“…As mentioned earlier, the study aims to evaluate the performance based on the postmerger accounting data and financial ratios, and did not want to be exposed to this factor by using abnormal returns (Healy et al, 1992). Furthermore, the abnormal returns in order to be calculated with the market model depend on the market index.…”

Section: Methodsology Accounting Measures-quantitative Variablesmentioning

confidence: 99%

“…This kind of research, along with their explanations, could partially not be correct as many other factors influence stock prices and their conclusions do not provide clear consciousness of their result argumentation; the use of post-merger accounting data (and especially, financial ratios) is a better and safer path to test directly for changes in accounting performance that result from mergers than stock price studies (Healy et al, 1992;Chatterjee and Meeks, 1996).…”

Section: Introductionmentioning

confidence: 94%

“…Many past studies on post-merger performance that employed accounting ratios and were conducted during the last decades supported an improvement in the corporate performance after the M&As action (Cosh et al, 1980;Parrino and Harris, 1999;Vijayakumar and Sridevi, 2013;Muhammad and Zahid, 2014;Oruc Erdogan and Erdogan, 2014;Rao-Nicholson et al, 2016), while others claimed that there was a deterioration in the post-merger firm performance (Meeks, 1977;Salter and Weinhold, 1979;Mueller, 1980;Kusewitt, 1985;Ravenscraft and Scherer, 1987;Dickerson et al, 1997;Sharma and Ho, 2002;Oduro and Agyei, 2013), and some others concluded a "zero" result or ambiguous results from the M&As action (Kumar, 1984;Healy et al, 1992;Chatterjee and Meeks, 1996;Ghosh, 2001;Srivastava and Prakash, 2014;Rodionov and Mikhalchuk, 2016).…”

Section: Literature Reviewmentioning

confidence: 99%

“…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.…”

Section: Introductionmentioning

confidence: 99%

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Mergers, taxation and accounting performance: Some evidence from Greece

Pazarskis¹,

Drogalas²,

Koutoupis³

2017

J. Account. Taxation

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The study examines the merger effects on the accounting performance of Greek firms, in parallel with their taxation impact, during the period of economic crisis in Greece. The study analyses twelve accounting measures from financial statements and financial ratios of a sample of Greek listed firms in the Athens Exchange that carried out one merger in the period from 2010 to 2015 as acquirers. The results revealed that none of the twelve examined accounting measures have changed significantly due to the merger event, one year after the merger transaction. Different results are proposed regarding the impact of the type of industry, as the findings of the study indicate a better accounting performance for the constructions firms than the others from our sample. Furthermore, the study investigates the impact of the new Greek Income Tax Code (GITC) (Law 4172/2013) that refers to the corporate restructuring in Greece. There is evidence that there is some effect from the new GITC and it provides further opportunities for capital gains, not subject to tax from mergers, during the period of the economic crisis in Greece.

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Section: Methodsology Accounting Measures-quantitative Variablesmentioning

confidence: 98%

Section: Methodsology Accounting Measures-quantitative Variablesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 94%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Mergers, taxation and accounting performance: Some evidence from Greece

Pazarskis¹,

Drogalas²,

Koutoupis³

2017

J. Account. Taxation

View full text Add to dashboard Cite

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An Evolutionary Perspective on Diversification and Corporate Restructuring: Entry, Exit, and Economic Performance During 1981-89

1996

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Asset Redeployment, Acquisitions and Corporate Strategy in Declining Industries

1997

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The resource‐based perspective suggests that firms are bundles of assets, some of which are fungible in nature. To the extent that some resources are fungible, firms should be able to redeploy them to enter new markets when their existing businesses decline. On the other hand, perspectives that emphasize the business‐specific nature of routines or managerial skills point to inherent risks in organizational transformation. In a declining market, resources can be redeployed within the firm through diversification‐oriented acquisitions, or they can be redeployed through market mechanisms through consolidation‐oriented acquisitions. In this paper, we examine the differences in performance outcomes between diversification‐oriented acquisitions and consolidation‐oriented acquisitions in industries within the defense sector, which have experienced significant decline. Our results indicate that consolidation‐oriented acquisitions outperform diversification‐oriented acquisitions in the decline phase of their industries in terms of both ex ante (stock market based) and ex post (operating) performance measures. At the corporate level, we find a positive relationship between focus and Tobin’s q, even when the industry is in decline. The implication of our results is that assets from declining industries are redeployed more effectively through market mechanisms than within the firm through the acquisition of complementary assets. ©1997 by John Wiley & Sons, Ltd.

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Does corporate performance improve after mergers?

Abstract: We examine the post-acquisition operating performance of

Cited by 1,259 publications

References 18 publications

Mergers, taxation and accounting performance: Some evidence from Greece

Mergers, taxation and accounting performance: Some evidence from Greece

An Evolutionary Perspective on Diversification and Corporate Restructuring: Entry, Exit, and Economic Performance During 1981-89

Asset Redeployment, Acquisitions and Corporate Strategy in Declining Industries

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