Leverage and acquisition performance

Harrison, Jeffrey S.; Hart, Matthew; Oler, Derek

doi:10.1007/s11156-013-0385-5

Cited by 26 publications

(10 citation statements)

References 92 publications

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“…To sum up, as for the effect of the mergers and whether they are good for a company that chooses to merge, there have been many other views than the above over time: some researchers again consider that there is a positive result or value creation after mergers (Lang et al, 1989;Netter et al, 2011;Dargenidou et al, 2016;Alhenawi & Stilwell, 2017;Gupta et al, 2021), some others claim a negative one or a decrease in business performance, profitability or additional leverage for the merged companies (Pawaskar, 2001;Yeh & Hoshino, 2002;Harford et al, 2009;Bhabra & Huang, 2013;Jandik & Lallemand, 2014;Harrison et al, 2014) and other researchers supports a pattern familiar to the previous literature: no significant change from mergers in the performance of the merger-involved companies (Healy et al, 1992;Ghosh, 2001;Sharma & Ho, 2002;Al-Hroot, 2016;Pantelidis et al, 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

“…They are a common occurrence in several industries, geographical areas and time periods, while in some other cases they occur with less frequency and intensity (Mueller, 1980;Jensen & Ruback, 1983;Ramaswamy & Waegelein, 2003;Martynova & Renneboog, 2008;Harrison, 2005). Their execution is associated with particular risks in relation to how they are implemented, due to the chosen business strategy and the characteristics of the merger by any company that wants to do a merger transaction (Lev & Mandelker, 1972;Amihud & Lev, 1981;Harford et al, 2009;Furfine & Rosen, 2011;Jandik & Lallemand, 2014;Harrison et al, 2014;Alhenawi & Krishnaswami, 2015).…”

Section: Introductionmentioning

confidence: 99%

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Merger Decisions, Accounting Information and Performance Stability Inside and Outside of Economic Crisis Periods: Evidence From Greece

Pazarskis

Giovanis

Koutoupis

et al. 2022

Journal of Business Economics and Management

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This study examines the merger decisions from a sample of Greek listed companies in the economic crisis period and shortly after its end, by employing various quantitative and qualitative variables of mergers that signalize different levels of risk. The results revealed that the performance subsequent of mergers is not significantly different for the merged companies. But in comparison to control sample of companies without mergers for the examined period, the results reveal that merger transactions signalize a more stable profitability and better performance for the companies with mergers. Furthermore, merger events signalize different performance levels during and after the crisis: mergers that took place when there was no economic crisis are far more profitable and lead to better performance from mergers during the period of economic crisis. Last, regarding the industry relatedness of the merged firms, the industry type and the merger combination of merged companies, there is not any impact from them on the post-merger performance in the examined accounting measures. The study proposes for companies that during crisis periods maybe merger be the only way to survive and provide a stable profitability and accounting performance for shareholders.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Merger Decisions, Accounting Information and Performance Stability Inside and Outside of Economic Crisis Periods: Evidence From Greece

Pazarskis

Giovanis

Koutoupis

et al. 2022

Journal of Business Economics and Management

View full text Add to dashboard Cite

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“…Table 2 shows the summary statistics of the firm and deal characteristics. Following previous literature, commonly used control variables, such as firm size (Humphery-Jenner & Powell, 2011;Moeller et al, 2004;Offenberg, 2009) and leverage (Harford et al, 2009;Harrison et al, 2014), are included in all model specifications. The variable definitions and construction methods are described in detail in Appendix A.…”

Section: Sample Descriptionmentioning

confidence: 99%

Credit rating downgrade risk and acquisition decisions

Kang

2021

Business Fin & Account

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This study examines the impact of credit rating downgrade risk on acquisition decisions. I find that firms at risk of a rating downgrade conduct fewer acquisitions. This result is robust to different measures of downgrade risk, instrumental variable analyses and matched sample tests. The correlation between downgrade risk and acquisitionpropensity is likely driven by the concern that risks associated with acquisitions lead to downgrades as evidenced by the more cautious approach of acquirers facing downgrade risk. These firms take more time to complete deals, hire more and higher-quality financial advisors, issue less debt to finance merger consideration, adopt target termination fee clauses and select targets with lower information asymmetry and higher ratings. This more cautious approach is associated with better long-term post-merger performance and reduced future-downgrade risk. Subgroup analyses reveal credit rating downgrade risk is negatively associated with acquisition decisions and positively associated with performance for investment-grade firms, especially BBB-firms, which are on the brink of being downgraded to non-investment grade. Such associations are not significant for non-investment-grade firms. Overall, the results suggest that firms at risk of a rating downgrade conduct acquisitions more cautiously, leading to fewer but more value-creating deals.

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“…It's concluded that a positive relationship between corporate governance standards and the acquiring firms' financial performance. Harrison et al (2013) [11] explained from an agency perspective that leverage might have a positive impact on company's performance by increasing pressure on managers to perform well and also by limiting their ability to allocate resources to unproductive uses. Therefore, they may expect the leverage to have a positive impact on the performance of the acquisition.…”

Section: Factors Influencing Firm Post-transaction Performancementioning

confidence: 99%

Exploring Improvements of Post-Acquisitions Corporate Performance in Industrial Sector in the Egyptian Stock Market

Abdelrahman¹

2019

JFA

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The purpose of this study is to examine the impact of Egyptians Acquisitions on the post-performance of the acquired companies from the period of 2003 to 2015 by the use of event study methodology. This is done by studying the financial post-performance (includes: liquidity, activity, profitability and capital structure ratios) of a sample consists of 17 companies from the industrial sector as dependent variables, and comparing their results with the pre-performance and the acquisition event as an independent variable. By using a non-parametric Mann-Whitney-Test that can replace the unpaired ttest in the case of small samples, in addition to the factor analysis. The Study tests the significant difference between performance of the acquired companies before and after the acquisition. Empirical results for the whole sample showed a negative significant difference between both the profitability and the capital structure performance of the acquired companies before and after the acquisition. On the other hand, it showed an insignificant difference between both the liquidity and the activity performance of the acquired companies before and after the acquisition. Studying the sub-industrial sectors shows that the Industry Sector has an impact on the performance of the acquired companies and that appears in The Basic Resources and Utilities Sub-sector liquidity, profitability and capital structure performance and has no impact on financial activity performance. For the Construction and Materials Sub-sector there is no impact on the liquidity, profitability and financial activity performance. However, there is a significant impact on the capital structure. For the Personal and Household Products Sub-sector, there is a significant impact on profitability performance, and there is no impact on liquidity, financial activity, and capital structure performance. For the Food, Beverages and Pharmaceutical Sub-sector there is no impact on the liquidity, profitability and financial activity performance and there is a significant impact on capital structure performance. By studying the impact of the Capital Issued on the post-performance of the acquired companies, the researcher showed that there is an impact on the capital structure performance for the acquired companies below 50 M and on profitability performance above 50 M issued capital. On the other hand, there is no impact on the other performance measures for companies above and below 50 M issued capital. Finally, the study results introduced some useful recommendations for the acquisition events in the Egyptian Market.

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Leverage and acquisition performance

Cited by 26 publications

References 92 publications

Merger Decisions, Accounting Information and Performance Stability Inside and Outside of Economic Crisis Periods: Evidence From Greece

Merger Decisions, Accounting Information and Performance Stability Inside and Outside of Economic Crisis Periods: Evidence From Greece

Credit rating downgrade risk and acquisition decisions

Exploring Improvements of Post-Acquisitions Corporate Performance in Industrial Sector in the Egyptian Stock Market

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