Does Corporate Performance Improve After Mergers? / Paul M. Healy, Krishna G. Palepu, Richard C. Rubak.

Format:

Book

Author/Creator:

Healy, Paul M.

Contributor:

National Bureau of Economic Research.

Palepu, Krishna G.

Rubak, Richard C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3348.

NBER working paper series no. w3348

Language:

English

Subjects (All):

Consolidation and merger of corporations.

Industrial statistics.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1990.

Cambridge, Massachusetts : National Bureau of Economic Research, 1990.

Summary:

We examine the post-acquisition operating performance of merged firms using a sample of the 50 largest mergers between U.S. public industrial firms completed in the period 1979 to 1983. The results indicate that merged firms have significant improvement in asset productivity relative to their industries after the merger, leading to higher post-merger operating cash flow returns. Sample firms maintain their capital expenditure and R&D rates relative to their industries after the merger, indicating that merged firms do not reduce their long-term investments. There is a strong positive relation between postmerger increases in operating cash flows and abnormal stock returns at merger announcements, indicating that expectations of economic improvements underlie the equity revaluations of the merging firms.

Notes:

Print version record

May 1990.