Review Article: Financial Performance Measures in Merger and Acquisition Studies

Abstract

Mergers and Acquisitions (M&A)s are motivated by various reasons and their real result is difficult to predict as many factors affect their outcome and procedure. Current study aimed to review M&A researches which used financial and accounting measures. A group of studies indicated that restructurings leaded to better financial and operating profile of companies and they resulted in synergistic gains. However, many researches concluded no significant improvement was achieved or restructurings worsened the performance of companies. Studies implied that rationale for unsuccessful M&As could be explained by agency conflicts or hubris theory. Studies also explained financial motivation as another factor inducing M&As especially during tough times or where environmental factors provided context for restructurings. Size of the merger participants and industry classification impacted the M&A procedure. However studies reported contradictory findings of effect of M&A type on restructurings and no relationship observed between post acquisition performance of companies and method of payment.

Keywords: accounting indicator, acquisition, effecting factors, financial measure, merger motivations

JEL Classification: G34