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Firm-level recent profitability and acquisition performance: exploring competing theoretical perspectives

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  • Ilaria Galavotti

    (Università Cattolica del Sacro Cuore)

Abstract

In light of the mixed findings upon whether good performers are good or bad acquirers, this paper explores the relationship between firm-level recent profitability and post-acquisition performance through the competing analysis of the managerial ability and the hubris hypotheses. The paper also builds on the organizational learning literature to examine the moderating effect played by a firm’s previous acquisition experience, as a potential contingency factor that may alter the performance effects of acquisitions. Based on a dataset of 469 acquisitions completed between 2007 and 2013, results provide support to the managerial ability hypothesis, according to which good performing firms exhibit better post-acquisition returns. Results also support the existence of learning benefits from previous acquisition experience, which further enhances the positive effect played by an acquirer’s recent profitability on post-acquisition performance.

Suggested Citation

  • Ilaria Galavotti, 2019. "Firm-level recent profitability and acquisition performance: exploring competing theoretical perspectives," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(3), pages 319-345, September.
  • Handle: RePEc:spr:eurasi:v:9:y:2019:i:3:d:10.1007_s40821-018-0111-2
    DOI: 10.1007/s40821-018-0111-2
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