Abstract:
This paper provides the empirical evidence on the operating performance of acquirers after merger and acquisition. The purpose of this study is to answer the important questions in relation to the motive of mergers and acquisitions and its value creation. The data, including mergers and acquisitions sample from the U.S. and the U.K. during 1992 – 2008. The operating performance is measured by the accounting numbers, which are operating cash flow scaled by book value and also adjusted by industry, and pre-performance. The study found the decreasing in operating performance after mergers and acquisitions for both U.S. and U.K. The results show that shock firms tend to have better abnormal operating performance than non-shock firms. There are the evidences that merger and acquisition activities decrease the operating performance of both positive and negative shock acquirers. In addition, the operating performance of acquirers in post-merger decrease for both domestic and cross-border acquisition. The results also show that domestic acquisitions are associated with better operating performance than cross-border acquisitions. The results in this study indicates that, in most cases, merger and acquisition do not create the economic value to the acquirers.
