Managerial decisions and accounting performance following mergers in Greece
-
DOIhttp://dx.doi.org/10.21511/imfi.15(1).2018.22
-
Article InfoVolume 15 2018, Issue #1, pp. 263-276
- Cited by
- 1414 Views
-
187 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
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.
- Keywords
-
JEL Classification (Paper profile tab)G34, M40
-
References32
-
Tables7
-
Figures0
-
- Table 1. Number and percent of mergers by year
- Table 2. Merger characteristics (qualitative variables) of the sample firms
- Table 3. Classification of financial ratios (quantitative variables)
- Table 4. Comparison results for 20 ratios from pre- and post-merger period (H1)
- Table 5. Results (Kruskal-Wallis test) from the merger type and the industry relatedness (H2-H3)
- Table 6. Results (Kruskal-Wallis test) by industry and cash or equity payments (H4-H5)
- Table 7. Results (Kruskal-Wallis test) based on subsidiary or non-subsidiary and legal form of the acquirer (H6-H7)
-
- Al-Hroot, Yusuf (2016). The Impact of Mergers on Financial Performance of the Jordanian Industrial Sector. International Journal of Management & Business Studies, 6(1), 9-13.
- Amihud, Y., & Lev, B. (1981). Risk Reduction as a Managerial motive for Conglomerate Mergers. Bell Journal of Economics, 12(2), 605-617.
- Annual Report of the Hellenic Capital Market Commission-HCMC, years 2011–2105. Athens Greece.
- Agorastos, Κ., Pazarskis, M., & Karagiorgos, T. (2013). Does Corporate Performance Improve after Domestic or International Mergers? Evidence from Greek Business in South-East Europe. In Pazarskis, M. (Ed.), Mergers and Acquisitions in Greece: Evidence from Past Experience (pp. 43-74). Lambert Academic Publishing, Saarbrücken, Germany.
- Alexandrakis, A., Pazarskis, M., Pantelidis, P., & Perperidou, C. (2015). Exploration of the Impact of the Industry Sector on the Profitability of the Greek Listed Firms after M&As. 4rth ICQQMEAS, May 23-24. Athens, Greece, Conference Proceedings, 39-45.
- Bhabra, H. S., & Huang, J. (2013). An empirical investigation of mergers and acquisitions by Chinese listed firms, 1997–2007. Journal of Multinational Financial Management, 23(3), 186- 207.
- Chatterjee, S., & Meeks, G. (1996). The Financial Effects of Takeover: Accounting Rates of Return and Accounting Regulation. Journal of Business Finance & Accounting, 23(5-6), 851-868.
- Clark, K., & Ofek, E. (1994). Mergers as a means of restructuring distressed firms: An empirical investigation. Journal of Financial & Quantitative Analysis, 29(4), 541-565.
- Cornett, M., & Tehnarian, H. (1992). Changes in Corporate Performance Associated with Bank Acquisitions. Journal of Financial Economics, 31(2), 211- 234.
- Dhiman, B., & Parray, B. (2011). Impact of acquisition on corporate performance in Indian manufacturing sector. Int. Journal of Multidisciplinary Research, 1(3), 61-81.
- Healy, P., Palepu, K., & Ruback, R. (1992). Does Corporate Performance Improve After Mergers?. Journal of Financial Economics, 31(2), 135-175.
- Ghosh, A., (2001). Does operating performance really improve following corporate acquisitions? Journal of Corporate Finance, 7(2), 151-178.
- Faccio, M., Masulis, R., & McConnell, J. (2006). Political connections and corporate bailouts. Journal of Finance, 61(6), 2597-2635.
- Francis, J., & Martin, X. (2010). Acquisition profitability and timely loss recognition. Journal of Accounting & Economics, 49(1-2), 161-178.
- Jensen, M., & Ruback, R. (1983). The Market for Corporate Control: the Scientific Evidence. Journal of Financial Economics, 11(1-4), 5-50.
- Jensen, M. (1986). Agency Costs of Free Cash Flow, Corporate Finance and Takeovers. American Economic Review, 76(2), 323-329.
- Karampatsas, N., Petmezas, D., & Travlos, N. (2014). Credit ratings and the choice of payment method in mergers and acquisitions. Journal of Corporate Finance, 25(2), 474-493.
- Leepsa, N. M., & Mishra, Chandra Sekhar (2013). Wealth creation through acquisitions. Decision, 40(3), 197-211.
- Lev, B., & Mandelker, G. (1972). The Microeconomic Consequences of Corporate Mergers. Journal of Business, 45(1), 85-104.
- Manson, S., Stark, A., & Thomas, H. (1995). A cash flow analysis of operational gains from takeovers. Certified research report no. 35, The Chartered Association of Certified Accountants, London, UK.
- Netter, J., Stegemoller, M., & Wintoki, M. B. (2011). Implications of data screens on merger and acquisition analysis: A large sample study of mergers and acquisitions from 1992 to 2009. Review of Financial Studies, 24(7), 2316-2357.
- Marfo Oduro, I., & Kwaku Agyei, S. (2013). Mergers & Acquisition and Firm Performance: Evidence from the Ghana Stock Exchange. Research Journal of Finance and Accounting, 4(7), 99-107.
- Oruc Erdogan, E., & Erdogan, M. (2014). Effect of Acquisition Activity on the Financial Indicators of Firms: An Application in BIST. International Journal of Business and Social Research, 4(7), 17-22.
- Pantelidis, P., Pazarskis, M., Deloudi, Κ., & Stamatouros, S. (2014). Do M&As of Greek listed firms before the economic crisis improve their current liquidity and profitability? MIBES Transactions, 8(1), 100- 112.
- Ramaswamy, K. P., & Waegelein, J. (2003). Firm Financial Performance Following Mergers. Review of Quantitative Finance and Accounting, 20(1), 115-126.
- Rani, N., Yadav, S. S., & Jain, P. K. (2013). Post-M&A operating performance of Indian acquiring firms: A Du Pont analysis. International Journal of Economics and Finance, 5(8), 65.
- Rao-Nicholson, R., & Salaber, J. (2013). The motives and performance of cross-border acquirers from emerging economies: Comparison between Chinese and Indian firms. International Business Review, 22(6), 963-980.
- Rao-Nicholson, R., Salaber, J., Cao, T. H. (2016). Long-term performance of mergers and acquisitions in ASEAN countries. Research in International Business and Finance, 36(1), 373-387.
- Ravenscraft, D. J., & Scherer, F. M. (1989). The profitability of mergers. International Journal of Industrial Organization, 7(1), 101-116.
- Rodionov, I., & Mikhalchuk, V. (2016). M&A Synergies in Domestic M&A Deals in Russia in 2006-2014. Russian Management Journal, 14(2), 3-28.
- Sharma, D. S., & Ho, J. (2002). The impact of acquisitions on operating performance: Some Australian evidence. Journal of Business Finance & Accounting, 29(1-2), 155- 200.
- Shleifer, A., & Vishny, Ρ. (1991). The Takeover Wave of the 1980s. Journal of Applied Corporate Finance, 4(3), 49-56.