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The Impact of Acquisitions on the Financial Performance of Companies in the Gulf States

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  • Loloah Mohammad Alselem

Abstract

The acquisition of economic institutions has become a global trend in recent periods, either through the transfer of all or part of the properties or shares. Such operations contribute to enhanced opportunities for economic expansion and growth. The Gulf States have not been away from these rising trends, with acquisitions taking a noticeable rise. This study analyses the impact of acquisitions on the financial performance of companies in the Gulf States based on the time sequence of data analysis for the duration between 2005-2018. The Empirical Bayesian and Ordinary Least Squares regression techniques are considered to demonstrate the acquisition impact on acquired non-financial companies in the Gulf States by using these major measures profitability, liquidity, and leverage. First and foremost, the study discovered that acquisition does not affect the profitability of the firm which formed into a new firm. But looking at the impact of the acquisition on leverage, the Interest Coverage ratio (COV) is been positively impacted by acquisition but the Debt to Equity ratio (ED) is not impacted by the acquisition. Additionally, the acquisition has a negative effect on a firm’s leverage. The outcomes of both OLS and the Bayesian have some variances, but the correspondence of the two results exceeds the difference. Thereby, it can be concluded that the Bayesian method is partially steady with the outcomes of OLS. The outcome of the study demonstrates that the financial performance of firms is not significantly affected by the acquisition.

Suggested Citation

  • Loloah Mohammad Alselem, 2021. "The Impact of Acquisitions on the Financial Performance of Companies in the Gulf States," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(9), pages 103-103, August.
    • Handle: RePEc:ibn:ijefaa:v:13:y:2021:i:9:p:103
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    References listed on IDEAS

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    1. Khurram Ashfaq & Muhammad Usman & Zahid Hanif & Toqeer Yousaf, 2014. "Investigating the Impact of Merger & Acquisition on Post Merger Financial Performance (Relative & Absolute) of Companies (Evidence from Non-Financial Sector of Pakistan)," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(11), pages 261-281, November.
    2. Michail Pazarskis & George Drogalas & Andreas Koutoupis, 2018. "Mergers and Accounting Performance: Some Evidence from Greece during the Economic Crisis," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 17(1), pages 31-45, March.
    3. Doukas, John & Travlos, Nickolaos G, 1988. " The Effect of Corporate Multinationalism on Shareholders' Wealth: Evidence from International Acquisitions," Journal of Finance, American Finance Association, vol. 43(5), pages 1161-1175, December.
    4. Ahammad, Mohammad Faisal & Glaister, Keith W., 2013. "The pre-acquisition evaluation of target firms and cross border acquisition performance," International Business Review, Elsevier, vol. 22(5), pages 894-904.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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