Managerial decisions and accounting performance following mergers in Greece

Abstract

An investigation was conducted to study a sample of 23 Greek firms listed on the Athens Stock Exchange that underwent mergers from 2011 to 2015, which is a period that embodies the Greek economic crisis. For the investigation, the authors use statistical tests to explore relative changes at twenty accounting ratios of the sample firms. These ratios are computed for one year before and after the merger. These ratios are found to be statistically insignificant indicating firms do not experience a post-merger improvement in accounting performance. The authors also examine six qualitative variables representing merger characteristics as past managerial decisions. Important findings for these characteristics include the following. First, for companies that do not fall under the same production line, the researchers observe an improvement for three ratios: collection period ratio, return on total assets, and profit or loss before tax. Thus, liquidity and profitability are improved. Second, when companies merged with their subsidiaries, the authors discover significant improvement for two ratios: gross margin and collection period ratio. In brief, positive results are found for mergers with subsidiaries and negative results with others. Third, the payment method influences two ratios, the current ratio and the stock turnover ratio. The current ratio is affected positively for the transactions in cash and negatively for the transactions in shares, while the stock turnover ratio is affected negatively for cash transactions and positively for share transactions.

Intra-industry’ Effects from Mergers on Financial Statements, in and out of Technology-intensive Industries: Evidence from Greece

“…These results are presented in Table 4. Similar conclusions have been drawn earlier studies based on stock market or accounting performance measures that supported no significant results after mergers per industry [13,16]. On the other hand, different conclusions that there is (a) an improvement at performance in different industry than technology-intensive industrial sector were found by Pazarskis et al [1], or (b) an improvement at performance of the technology-intensive industrial sector were found by Alexandrakis et al [22].…”

“…There is no significant change of the examined number of the quantitative variables. Similar conclusions with no significant results after mergers per industry have been drawn earlier studies examining several accounting performance measures for the commercial and services sector after mergers [1,13]. Finally, some other researchers concluded that there is a worsening in performance [16,22].…”

“…We observe that there is no statistically significant change after mergers in accounting performance of the merged firms in the primary sector. Pantelidis et al [13] argued also for similar results with no significant change after mergers per industry, as well as Pazarskis et al [1] have been drawn same conclusions for the commercial and services sector after mergers. Finally, some other researchers concluded that there is a worsening in performance after mergers in this sector [16,22].…”

“…The sample includes mergers for 6 years (2011-2016) and is examined for 1 year before and after merger, thus our data analysis covers from the year 2010 (the beginning of the economic crisis in Greece) up to the year 2017 (the end of the economic crisis in Greece). More analytically, we explore accounting performance based on a 'change model' that compares post-merger data (1 year after merger, thus t + 1) and pre-merger data (1 year before merger, thus t − 1) and is applied as a modified methodology of Ramaswamy and Waegelein [17], Francis and Martin [24] and Pantelidis et al [13]. In this study, we have chosen to calculate the mean from the sum of each ratio than the median for more accurate results, as many other past studies [15,25].…”

“…Greece, after the global economic crisis in 2008, experienced an extended economic crisis almost for a decade (mainly from 2010 to 2018). During this period Greece was under the supervision of the 'troika' (European Union-EU, International Monetary Fund-IMF and European Central Bank) [13]. Economic crisis provided a 'toxic' environment for firms' activities in Greece, with a shrinking of their liquidity and profitability.…”