Method of Payment and Operating Performance of Acquiring Companies: A Study of Indian Mergers
The present paper aims at analyzing the operating performance of 84 acquiring companies involved in M&As in India between 2000-2010. The study examines the relation between the change in operating performance of acquiring firms and cash and stock methods of payment. The results of the study indicate that the operating performance of sample acquiring companies deteriorates after the merger in the long run. Out of 5 measures of performance 3 measures shows that the control firms outperform sample firms. The study also concludes that Cash flows increase significantly following mergers in case of stock financed mergers but decline for cash financed mergers.
ÂKeywords: Acquisitions, Cash adjusted assets, Cash Mergers, Mergers, Operating income
Barber, B.M. and Lyon, J.D. (1996), â€œDetecting Abnormal Operating Performance: The Empirical Power and Specification of Test Statisticsâ€, Journal of financial Economics, No 41, pp 359-399.
Beena P.L. (2004), â€œTowards Understanding the Merger Wave in the Indian Corporate Sector â€“ a comparative perspectiveâ€, Working paper 355, February, CDS, Trivandrum, pp 1-44.
Clark, K. and Ofek, E. (1994), â€œMergers as a Means of Restructuring Distressed Firms: An Empirical Investigationâ€, Journal of Financial and Quantitative Analysis, No 29, pp 541-566.
Ghosh, A. (2001), â€˜â€˜Does Operating Performance Really Improve Following Corporate Acquisitionsâ€™â€™, Journal of Corporate Finance, Vol. 7, pp 151-78.
Healy, P.J., Palepu, K.G., Ruback, R.S. (1992), â€œDoes Corporate Performance Improve After Mergers? â€œ, Journal of Financial Economics, No 31, pp 135-175.
Heron, R. and E. Lie. (2002), "Operating Performance and the Method of Payment in Takeovers", Journal of Financial and Quantitative Analysis, March, pp 137-156.
Khurana, R., & Warne, D.P. (2014), â€œMergers, Acquisitions and Firms' Performance: Experience of TATA Industryâ€. International Journal of Entrepreneurship and Small Business Management, 1(1), pp 33-50.
Kumara, N.V., & Satyanarayana, M. (2013), â€œComparative Study of Pre and Post Corporate Integration through Mergers and Acquisitionâ€, International Journal of Business and Management Invention, 2(3), pp 31-38.
Linn, S.C. and Switzer, J.A. (2001), â€œAre Cash Acquisitions Associated with Better Post Combination Operating Performance than Stock Acquisitions?â€ , Journal of Banking and Finance , No 6, pp 1113-1138.
Loughran, T. & Vijh, A.M. (1997), â€œDo Long-Term Shareholders Benefit from Corporate Acquisitions?â€, Journal of Finance, vol. 51, No. 5, pp 1765-1790.
Manson S., Stark A., Thomas H. (1994), â€œA Cash Flow Analysis of the Operational Gains from Takeoversâ€, Research report 35 of the Chartered Association of Certified Accountants, London.
Mantravadi P and Reddy V A, (2008a), â€œPost-Merger Performance of Acquiring Firms from Different Industries in Indiaâ€, International Research Journal of Finance and Economics, No 22, pp 192-204.
Mantravadi P and Reddy V A, (2008b), â€œType of Merger and Impact on Operating Performance: The Indian Experienceâ€, Economic and Political Weekly, No 9, pp 66-74.
Martynova, M., Oosting, S., & Renneboog, L. (2006), â€œThe Long-Term Operating Performance of European Mergers and Acquisitionsâ€, European Corporate Governance Institute (ECGI) Working Paper Series in Finance JEL Classifications: G34, Working Paper, 137/2006.
Nick de Leeuw (2012), â€œThe Long-Term Operating Performance of European Mergers and Acquisitions: Private Vs Public. Master Thesisâ€, Master Finance, Tilburg School of Economics and Management, Tilburg University, The Netherlands.
Pawaskar V, (2001), â€œEffect of Mergers on Corporate Performance in Indiaâ€, Vikalpa, 26 (1), pp 19-32.
Rahman, R.A. and Limmack, R.J. (2004), â€œCorporate Acquisitions and the Operating Performance of Malaysian Companiesâ€, Journal of Business Finance & Accounting, No 31, pp 359-400.
Ramachandran A. and T. Sathishkumar (2014), â€œImpact of Mergers and Acquisitions on Profitability: Evidence from Manufacturing Industry in Indiaâ€, Pacific Business Review International, Volume 7, Issue 1, pp 93-104.
Ramachandran A. and T. Sathishkumar. (2011), â€œMergers and acquisitions: An Empirical Study on the Short-Term Post-Merger Performance of Corporate Firms in Indiaâ€, International Journal of Research in Commerce, Economics, and Management 1(3), (July), pp 80-103.
Ramaswamy, K. and J. Waegelein. (2003), "Firm Financial Performance Following Mergers", Review of Quantitative Finance and Accounting, No 20, pp 115-126.
Rani, N., Yadav, S. S., & Jain, P. K. (2010), â€œCorporate Merger Practices in India: An Empirical Studyâ€. In proceedings of Tenth Global Conference on Flexible Systems Management GLOGIFT10, (pp. 26â€“27) July, Graduate School of System Design and Management Collaboration Complex, Hiyoshi Campus, Keio University, Japan. Retrieved from http://ssrn.com/abstract=2043698.
Saple, Vardhana (2000), â€œDiversification, Mergers and their Effect on Firm Performance: A Study of the Indian Corporate Sectorâ€. Unpublished Ph.D. thesis submitted to Indira Gandhi Institute of Development Research, Mumbai.
Svetlana Grigorieva, Tatiana Petrunina (2013), â€œThe Performance of Mergers and Acquisitions in emerging Capital Markets: New Evidenceâ€, BASIC Research Program Working Papers Series: Financial Economics WP BRP 20/FE/2013.
Teoh, Siew Hong, Ivo Welch, and T.J. Wong. (1995), â€œEarnings management in seasoned equity offeringsâ€, Working paper (University of Michigan, Ann Arbor, MI).
Teoh, Siew Hong, T.J. Wong, and Gita R. Rao. (1994), â€œIncentives and Opportunities for Earnings Management in Initial Public Offeringsâ€, Working paper University of Michigan, Ann Arbor, MI.
Vanitha S and Selvam, M. (2007), â€œFinancial performance of Indian manufacturing companies during pre and post-mergerâ€, International Research Journal of Finance and Economics, No 12, pp 7-29.
- There are currently no refbacks.
Copyright (c) 2020 Dr Rashmi I Turamari, Dr R L Hyderabad