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Evaluation of merger premium and firm performance in Europe

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  • Matthias Nnadi
  • Daniel Aghanya

Abstract

This paper investigates whether the deal premium affects the performance of the acquiring firms in European mergers and acquisitions (M%As) deals for the period 2000-2013. We find a significant reduction in short-term performance of the acquiring firms after the M%As, reflecting the overpayment hypothesis. Our result also indicates that the negative effect on the performance of the acquiring firms is less pronounced in the long-term. The result confirms the synergy hypothesis and the existence of quadratic relationship between high premium and performance. Our findings are robust as we control for firm and time trends. The findings of our study have implications for companies engaging in acquisitions in Europe.

Suggested Citation

  • Matthias Nnadi & Daniel Aghanya, 2018. "Evaluation of merger premium and firm performance in Europe," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 9(2), pages 119-140.
    • Handle: RePEc:ids:injbaf:v:9:y:2018:i:2:p:119-140
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    Cited by:

    1. Baldi, Francesco & Salvi, Antonio, 2022. "Disentangling acquisition premia: Evidence from the global market for corporate control," Finance Research Letters, Elsevier, vol. 48(C).

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