Can Firms Learn to Acquire? Do Markets Notice?
Using financial, accounting and questionnaire response data we investigate the post-acquisition performance of 47 US bank holding companies that executed 579 mergers and acquisitions in the 1964-1996 period and compare it with their competitors' performance. The objectives of the study are to identify the factors that explain the variance in the distribution of post-acquisition performance, and to test whether the financial markets efficiently predict performance outcomes by incorporating public information about the acquiring firm into the stock price following the acquisition announcement. The tested model includes measures of post-acquisition decisions, such as the degree of integration of the target within the acquirer's structure and the replacement of the top management team, as well as approximations of the acquirer's capability to implement the integration process. We find that prior acquisition experience does not improve post-acquisition performance, but the degree to which acquirers articulate and codify their experience in ad-hoc tools does. Furthermore, a high level of integration of the target within the acquirer's organization improves long-term performance, whereas the replacement of top management worsens it. Financial markets do not seem to be sensitive to any of these predictors of performance in their short-term reactions, but long-term adjustments are significantly impacted by acquirers' integration strategies and codified implementation knowledge, in line with the variations of accounting returns.
|Date of creation:||Jan 2000|
|Date of revision:|
|Contact details of provider:|| Postal: 3301 Steinberg Hall-Dietrich Hall, 3620 Locust Walk, Philadelphia, PA 19104.6367|
Web page: http://fic.wharton.upenn.edu/fic/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
- Richard R. Nelson, 1995. "Recent Evolutionary Theorizing about Economic Change," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 48-90, March.
- Ikenberry, David & Lakonishok, Josef & Vermaelen, Theo, 1995.
"Market underreaction to open market share repurchases,"
Journal of Financial Economics,
Elsevier, vol. 39(2-3), pages 181-208.
- David Ikenberry & Josef Lakonishok & Theo Vermaelen, 1994. "Market Underreaction to Open Market Share Repurchases," NBER Working Papers 4965, National Bureau of Economic Research, Inc.
- Cohen, Michael D, et al, 1996.
"Routines and Other Recurring Action Patterns of Organizations: Contemporary Research Issues,"
Industrial and Corporate Change,
Oxford University Press, vol. 5(3), pages 653-98.
- Michael D. Cohen & Roger Burkhart & Giovanni Dosi & Massimo Egidi & Luigi Marengo & Massimo Warglien & Sidney Winter & with comments by Benjamin Coriat, 1995. "Routines and Other Recurring Action Patterns of Organizations: Contemporary Research Issues," Working Papers 95-11-101, Santa Fe Institute.
- Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
- Agrawal, Anup & Jaffe, Jeffrey F & Mandelker, Gershon N, 1992. " The Post-merger Performance of Acquiring Firms: A Re-examination of an Anomaly," Journal of Finance, American Finance Association, vol. 47(4), pages 1605-21, September.
- Healy, Paul M. & Palepu, Krishna G. & Ruback, Richard S., 1992. "Does corporate performance improve after mergers?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 135-175, April.
- Raghavendra Rau, P. & Vermaelen, Theo, 1998. "Glamour, value and the post-acquisition performance of acquiring firms," Journal of Financial Economics, Elsevier, vol. 49(2), pages 223-253, August.
- Calomiris, Charles W., 1999. "Gauging the efficiency of bank consolidation during a merger wave," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 615-621, February.
- Thakor, Anjan V., 1999. "Information technology and financial services consolidation," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 697-700, February.
When requesting a correction, please mention this item's handle: RePEc:wop:pennin:00-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.