Emperical research on mergers and corporate performance
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Transcript of Emperical research on mergers and corporate performance
Empirical Research on mergers and corporate performance in India
Anand Kumar AdeppaSMBA10003
Study
• Abnormal returns to Shareholders during the time
• Reported financial results before merging• Reflections of stock prices at the time of
acquisition announcement
Review by B Lev and G Mandekar
No significant difference in• Profitability of firms with related and
unrelated diversification.Superior profitability with related mergers
Analysis
• 57 large mergers between 1995 and 2002Sample • 10% of own asset size• Financial data for 3 years• Not more than 4 mergers in a financial yearDesign Problems• Systematic difference in size• Acquisitions on above normal performance
Methodology
Part A• Operating cash flows• Market value base• Merger Financing • Comparing post Merger and Pre Merger DataPart B• Same with denominator with book value of
assets and sales
Post Merger performance
Median Changes in Cash flows and Assets
Cash Flow Return on Market Value of Assets
Cross Sectional Regression results
• Estimation
Final Summary
The study was to measure the cash flows after mergers in terms of
• Market value of Assets• Book Value of Assets• Sales ValueBook value and Sales Value indicate that
operating performance improves but market value does not support the above hypothesis.