Abstract:Purpose
– This paper aims to examine the productivity and spillover effect of Malaysian horizontal merger and acquisition (M&A) activities in the long run.
Design/methodology/approach
– In terms of analytical tools, economic value added (EVA) and data envelopment analysis (DEA) are used.
Findings
– The results of this study reveal that M&As in the absence of antitrust laws… Show more
“…It is defined as a set of financial and non-financial indicators, which offer information on the degree of achievement of objectives and results (Lebas and Euske, 2007). Previous studies related to growth strategies focused mainly on using financial indicators that are extracted from the annual reports of companies (Klarner and Raisch, 2013;Aik et al, 2015;Kuriakose and Paul, 2016). In regard to this, balanced scorecard criticized the use of financial indicators and proposed to measure organizational performance using assessments of financial indicator, customers, internal process and learning and growth (Kaplan and Norton, 1992).…”
Section: Organizational Performancementioning
confidence: 99%
“…Companies benefit greatly from alliances and M&A for reducing costs and increasing the efficiency of distribution networks (Qiu, 2010). However, the literature reveals that researchers focused either on the effect of M&A (Aik et al, 2015;Shanmugam and Nair, 2004) or on strategic alliance (Abdullah and Zainal, 2011;Sambasivan et al, 2011Sambasivan et al, , 2013, with the majority of studies using secondary data approach (Brekalo et al, 2016;Chen and Chang, 2016;L opez-Duarte et al, 2016;Min and Joo, 2016). Only a few studies have investigated the effect of strategic alliance, M&A using a survey approach, and the majority of them did not differentiate between M&A.…”
Purpose
Inter-organizational trust has a vital role in any external trade relationship. However, there are not many studies relating to growth strategies and inter-organizational trust in firms in emerging markets. The purpose of this paper is to identify and compare the effect of external growth strategies on the organizational performance of companies and to examine the mediating role of inter-organizational trust between growth strategies and organizational performance.
Design/methodology/approach
Data were collected from 240 senior managers from public listed companies (PLCs) in Malaysia and were analyzed using analysis of a moment structures.
Findings
The findings indicate that growth strategies have a significant effect on organizational performance. Strategic alliances and acquisitions also have significant effects on organizational performance. Moreover, inter-organizational trust fully mediates the effect of growth strategies on organizational performance.
Research limitations/implications
As purposive sampling was used, selecting only managers with experience of the issues concerned, any common findings are likely to be generalizable to managers in similar situations.
Practical implications
Building inter-organizational trust among companies and relying on strategic alliance and acquisition, rather than merger, will sharpen their competitiveness and enable them to survive and thrive.
Social implications
The increase in organizational performance of PLCs will have a significant effect on employment and on gross domestic product (GDP), which will have a beneficial effect on citizens.
Originality/value
Studies that are related to these variables in emerging economies are still in their infancy. This study compared the effect of external growth strategies and contributed to the literature in the area of trust and external growth strategies.
“…It is defined as a set of financial and non-financial indicators, which offer information on the degree of achievement of objectives and results (Lebas and Euske, 2007). Previous studies related to growth strategies focused mainly on using financial indicators that are extracted from the annual reports of companies (Klarner and Raisch, 2013;Aik et al, 2015;Kuriakose and Paul, 2016). In regard to this, balanced scorecard criticized the use of financial indicators and proposed to measure organizational performance using assessments of financial indicator, customers, internal process and learning and growth (Kaplan and Norton, 1992).…”
Section: Organizational Performancementioning
confidence: 99%
“…Companies benefit greatly from alliances and M&A for reducing costs and increasing the efficiency of distribution networks (Qiu, 2010). However, the literature reveals that researchers focused either on the effect of M&A (Aik et al, 2015;Shanmugam and Nair, 2004) or on strategic alliance (Abdullah and Zainal, 2011;Sambasivan et al, 2011Sambasivan et al, , 2013, with the majority of studies using secondary data approach (Brekalo et al, 2016;Chen and Chang, 2016;L opez-Duarte et al, 2016;Min and Joo, 2016). Only a few studies have investigated the effect of strategic alliance, M&A using a survey approach, and the majority of them did not differentiate between M&A.…”
Purpose
Inter-organizational trust has a vital role in any external trade relationship. However, there are not many studies relating to growth strategies and inter-organizational trust in firms in emerging markets. The purpose of this paper is to identify and compare the effect of external growth strategies on the organizational performance of companies and to examine the mediating role of inter-organizational trust between growth strategies and organizational performance.
Design/methodology/approach
Data were collected from 240 senior managers from public listed companies (PLCs) in Malaysia and were analyzed using analysis of a moment structures.
Findings
The findings indicate that growth strategies have a significant effect on organizational performance. Strategic alliances and acquisitions also have significant effects on organizational performance. Moreover, inter-organizational trust fully mediates the effect of growth strategies on organizational performance.
Research limitations/implications
As purposive sampling was used, selecting only managers with experience of the issues concerned, any common findings are likely to be generalizable to managers in similar situations.
Practical implications
Building inter-organizational trust among companies and relying on strategic alliance and acquisition, rather than merger, will sharpen their competitiveness and enable them to survive and thrive.
Social implications
The increase in organizational performance of PLCs will have a significant effect on employment and on gross domestic product (GDP), which will have a beneficial effect on citizens.
Originality/value
Studies that are related to these variables in emerging economies are still in their infancy. This study compared the effect of external growth strategies and contributed to the literature in the area of trust and external growth strategies.
“…This study uses EMAS Index Bursa Malaysia (FTSEEMAS) as a market benchmark that follows previous studies from Aik et al (2015); Al-Sabri and Nordin (2018). However, EMAS Index is a weighted index and focuses more on large firms so it would carry more weight for larger firms.…”
Section: Examination Of Long-run Performancementioning
“…Devos et al, () and Takechi, () argue that resulting companies may improve their technical efficiency by increasing their turnover, by getting bidders to work together to achieve targets and by engaging in research and development (R&D) thereby gaining from asset complementarities and improved operations. It is expected that the shareholders of both target and bidder firms will benefit from the technical efficiency gains (Aik et al , , ; Masoumi et al , ), suggesting endogeneity between anticipated and actual technical efficiency improvements in terms of the firms’ market value and earnings per share (Fee and Thomas, ; Gupta, ).H2: M&As in Nigeria yield higher value creation in resulting companies due to synergistic gains created by a feedback process between technical efficiency and value creation due to the amalgamation .…”
There is a growing literature on how the beneficial impacts of horizontal mergers and acquisitions (M&A) should be measured. Thus far, however, there have been few studies addressing endogeneity between technical efficiency and value creation: they tend to present a bidirectional and simultaneous relationship. This research contributes to the debate by investigating the impact of voluntary horizontal M&A on these metrics in Nigeria between 1995 and 2012, in light of the individual performance of bidders, targets, and the resulting corporate companies. First, technical efficiency, technology gap ratio, and returns‐to‐scale estimates were computed based on a meta‐frontier DEA approach, together with a set of contextual variables that encompass performance indicators which reflect the value creation process. Then, robust regressions were used to discriminate these efficiency estimates in terms of such business‐related variables, correcting for endogeneity and controlling for industry and trend effects. The results reveal that these contextual variables significantly impact virtual efficiency and returns‐to‐scale levels, and that there is a trade‐off between efficiency and value creation at some point in the merging process. Managerial implications are derived.
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