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Working paper

The Performance of Mergers and Acquisitions in Emerging Capital Markets: New Evidence

Grigorieva S., Petrunina T.
Researchers have long tried to define the impact of corporate mergers and acquisitions on company performance. We contribute to the existing literature by examining the influence of M&A deals on company value in the short-run using the event study method and in the long-run based on economic profit concept. Examining a sample of 80 deals initiated by companies from emerging capital markets over 2002-2009, we find that M&As are value-destroying deals for the combined firms. Results from the long-run analysis prove the negative industry-adjusted differences between post-acquisition and pre-acquisition performance measures. The difference is equal to a significant -3.3% for the EBITDA/Sales ratio. The Economic Profit approach demonstrates a similar result. Our findings from the short-run analysis indicate that the announcements of M&A deals generate significant high returns for target shareholders, while the returns to bidder shareholders are not significant. We also analyze the determinants of M&A performance, such as method of payment, business similarity, and the target’s country.