Merger & Acquisition and Capital Expenditure in Health Care

Abstract

Investment, especially through merger and acquisition (M&A), is a leading topic of concern among health care managers. In addition, the implications of this activity for organization and market concentration are of great interest to policy makers. Using a sample of 2256 firm-year observations in the health care industry during the period from 1985 to 2011, this article provides novel evidence that managers learn from financial markets in making capital expenditure (CAPEX) and M&A investment decisions. Within the industry, managers in the Drugs subsector are most likely to do so, whereas managers in the Medical Equipment and Supplies are least likely to do so. We find informative stock prices improve firm financial performance. This article highlights the importance of financial markets for real economic activity in the health care industry.

Economic and Institutional Determinants of Mergers & Acquisitions in BRICS, G7 and G20 Economies

“…Many studies focus on financial perspectives. Travlos (1987) take on corporate takeover bids, methods of payment, and bidding firms' stock returns, Beitel, Schiereck, and Wahrenburg (2004) explain M&A success in European banks, Hirshleifer (1995) discuss strategic and informational issue relating to finance, Kyriazis (2010) dealt with long-term post acquisition performance of Greek acquiring firms, Ouyang and Hilsenrath (2017) studied M&A and capital expenditure in healthcare based on stock price variation; Sehgal, Delistingee and Deisting (2012) assess the impacts of M&A announcement and financing strategy on stock returns taking evidence from BRICS markets, Vazirani (2012) provides a literature review for mergers and acquisitions performance evaluation; Weaver, Harris, Bielinski and MacKenzie (1991) assess the financial management aspects of merger and acquisition valuation.…”