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Evaluating the instantaneous and medium-run impact of mergers and acquisitions on firm values

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  • Bianconi, Marcelo
  • Tan, Chih Ming

Abstract

This paper contributes to the literature investigating the impact of mergers and acquisitions (M&A) activity on an acquirer's firm value. To do so, we exploit a large sample of 65,521 M&A deals globally from the Communications, Technology, Energy and Utilities sectors in the years of 2000–2010. We focus on an enterprise value multiple, the ratio of EV/EBITDA, as a measure of firm value. Using the difference-in-differences (DID) strategy with and without propensity score matching, we find significant evidence of negative medium-run M&A effects and positive instantaneous M&A impact on firm value potentially because EV moves faster relative to a slow moving EBITDA.

Suggested Citation

  • Bianconi, Marcelo & Tan, Chih Ming, 2019. "Evaluating the instantaneous and medium-run impact of mergers and acquisitions on firm values," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 71-87.
    • Handle: RePEc:eee:reveco:v:59:y:2019:i:c:p:71-87
    DOI: 10.1016/j.iref.2018.08.005
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    Cited by:

    1. Austin, Rebekah E. & Dunham, Lee M., 2022. "Do FinTech acquisitions improve the operating performance or risk profiles of acquiring firms?," Journal of Economics and Business, Elsevier, vol. 121(C).
    2. Jakub Marszalek & Bogna Kazmierska-Jozwiak & Ewelina Niedzielska, 2022. "Value of the Acquiring Company and the Success of M&A Transaction in the Automotive Sector," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 700-716.
    3. Hana BOR & Avraham KETKO, 2019. "A University Reinvents Itself: A Case Study For Understanding Strategic Mergers And Integration Between Academic Institutions," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 20(3), pages 241-258, July.
    4. Isha Gupta & T. V. Raman & Naliniprava Tripathy, 2023. "Impact of Merger and Acquisition on Financial Performance: Evidence from Construction and Real Estate Industry of India," FIIB Business Review, , vol. 12(1), pages 74-84, March.
    5. Jakub Marszalek & Bogna Kazmierska-Jozwiak & Ewelina Niedzielska, 2022. "The Value of the Acquiring Company and the Success of M&A Transaction in the Automotive Sector," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 160-176.

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    More about this item

    Keywords

    EV/EBITDA; Treatment effect; DID estimation; Propensity score matching;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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