Does Operating Performance Really Improve Following Corporate Acquisitions?

Posted: 14 Jul 2001


This article examines the impact of the method of payment used in acquisitions on the acquiring firms' post-merger operating cash flow and some of its components cash inflow from sales, cash payments to suppliers, and payments for other operating expenses. I find that acquiring firms that pay with cash are able to increase their post-merger cash flow significantly, relative to peer firms, primarily through improved asset turnover (sales per dollar of assets). The post-merger cash flow of stock acquisitions, however, declines significantly. Although stock acquisitions are able to implement effective cost-cutting strategies, the decline in asset turnover outweighs benefits from cost-cutting strategies.

Note: Previously titled Accounting Based Performance of Acquiring Firms and Method of Payment used in Acquisitions

JEL Classification: M41, G34

Suggested Citation

Ghosh, Al (Aloke), Does Operating Performance Really Improve Following Corporate Acquisitions?. Available at SSRN:

Al (Aloke) Ghosh (Contact Author)

UNC Charlotte ( email )

9201 University City Blvd
Charlotte, NC 28223
United States


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