Measuring the Performance of Acquisitions: An Empirical Investigation Using Multiple Criteria

The performance of corporate acquisitions is a popular research topic. Researchers have employed various criteria in their attempt to evaluate acquisition performance. This paper replicates and extends a previous study by investigating the comparability of the three most widely used measures of acqu...

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Bibliographic Details
Published in:British journal of management 2010-12, Vol.21 (4), p.859-873
Main Authors: Papadakis, Vassilis M., Thanos, Ioannis C.
Format: Article
Language:English
Subjects:
Abnormal returns
Accounting
Accounting methods
Acquisitions
Acquisitions & mergers
Comparative analysis
Empirical research
Greece
Management attitudes
Management theory
Studies
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Summary:The performance of corporate acquisitions is a popular research topic. Researchers have employed various criteria in their attempt to evaluate acquisition performance. This paper replicates and extends a previous study by investigating the comparability of the three most widely used measures of acquisition performance, namely accounting‐based measures, cumulative abnormal returns and managers' subjective assessments, in a non‐Anglo Saxon setting. Empirical testing is based on a sample of 50 domestic acquisitions carried out by Greek firms. Overall, results from the three measures indicate failure rates from 50% to 60%. However, the most impressive finding stems from the comparison (correlation analysis) of the alternative measures. Accounting‐based measures are positively correlated to managers' subjective assessments. Contrarily, cumulative abnormal returns are not correlated to either accounting‐based measures or managers' subjective assessments. This lack of statistically significant relationships between the performance criteria may provide a plausible basis for explaining some of the contradictory results often reported in the mergers and acquisitions literature. In light of these findings, we discuss their implications for both theory and practice and suggest ideas for future research.
ISSN:1045-3172
1467-8551
DOI:10.1111/j.1467-8551.2009.00671.x