Share:


Corporate mergers and accounting performance during a period of economic crisis: evidence from Greece

    Michail Pazarskis Affiliation
    ; Manthos Vogiatzoglou Affiliation
    ; Andreas Koutoupis Affiliation
    ; George Drogalas Affiliation

Abstract

Merger deals are one of the most important business strategies which can change the company value dramatically. Mergers have been constantly a subject of debate and analysis over the past decades. Thus, it is a matter of great interest to analyze merger activities during economic crisis periods, as it was in Greece recently. This paper explores the accounting performance of Greek listed companies after mergers in 2009–2015, the economic crisis period in Greece. Thus, all mergers of listed companies during the above period are initially examined through several financial ratios from financial statements for one year before and after the merger. The analysis of Greek listed companies that comprise the final sample is performed with several regression models. The study provides positive and statistically significant results for mergers, in the sense that the period of crisis that the merger took place is positively correlated with several performance measures. Regarding the industry relatedness, the study provides evidence that conglomerate mergers have more positive impact to the improvement of the companies’ profitability than non-conglomerate mergers. Last, for the merger events that take place far from the climax of the economic crisis, the profitability of merged companies is increased.

Keyword : merger, ratios, financial statements, accounting performance, Greece, economic crisis

How to Cite
Pazarskis, M., Vogiatzoglou, M., Koutoupis, A., & Drogalas, G. (2021). Corporate mergers and accounting performance during a period of economic crisis: evidence from Greece. Journal of Business Economics and Management, 22(3), 577-595. https://doi.org/10.3846/jbem.2021.13911
Published in Issue
Feb 18, 2021
Abstract Views
535
PDF Downloads
478
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Aggarwal, M., & Singh, S. (2015). Effect of merger on financial performance: A case study of Kingfisher Airlines. Social Science Research Network. https://doi.org/10.2139/ssrn.3205827

Aggarwal, P., & Garg, S. (2019). Impact of mergers and acquisitions on accounting-based performance of acquiring firms in India. Global Business Review, 20(1), 1–19. https://doi.org/10.1177/0972150919852009

Agyei-Boapeah, H. (2017). Easing financing and M&A investment constraints: The role of corporate industrial diversification. Annals of Economics and Finance, 18(2), 277–290. http://aefweb.net/AefArticles/aef180203Agyei-Boapeah.pdf

Ahmed, M., & Ahmed, Z. (2014). Mergers and acquisitions: Effect on financial performance of manufacturing companies of Pakistan. Middle-East Journal of Scientific Research, 22(4), 689–699.

Alcalde, N., & Espitia, M. (2003). The characteristics of takeover targets: The Spanish experience 1991– 1997. Journal of Management and Governance, 7, 1–26. https://doi.org/10.1023/A:1022416521512

Alexandrou, G., Gounopoulos, D., & Hardy, T. (2014). Mergers and acquisitions in shipping. Transportation Research Part E: Logistics and Transportation Review, 61(1), 212–234. https://doi.org/10.1016/j.tre.2013.11.007

Al-Hroot, Y. A. K. (2016). The impact of mergers on financial performance of the Jordanian industrial sector. International Journal of Management and Business Studies, 6(1), 9–13.

Azhagaiah, R., & Sathishkumar, T. (2014). Impact of merger and acquisitions on operating performance: Evidence from manufacturing firms in India. Managing Global Transitions, 12(2), 121–139. http://www.fm-kp.si/zalozba/ISSN/1581-6311/12_121-139.pdf

Berrioategortua, J., Olasagasti, O., & Florencio, B. (2018). Does company performance improve after M&A? A literature review. In S. Finkelstein & C. Cooper (Eds.), Advances in mergers and acquisitions (Vol. 17, pp. 31–51). Emerald Publishing Limited. https://doi.org/10.1108/S1479-361X20180000017002

Braguinsky, S., Ohyama, A., Okazaki, T., & Syverson, C. (2015). Acquisitions, productivity, and profitability: Evidence from the Japanese cotton spinning industry. American Economic Review, 105(7), 2086–2119. https://doi.org/10.1257/aer.20140150

Brahma, S., Boateng, A., & Ahmad, S. (2018). Motives of mergers and acquisitions in the European public utilities: An empirical investigation of the wealth-anomaly. International Journal of Public Sector Management, 31(5), 599–616. https://doi.org/10.1108/IJPSM-01-2017-0024

Chatterjee, S., & Meeks, G. (1996). The financial effects of takeover: Accounting rates of return and accounting regulation. Journal of Business Finance & Accounting, 23(5–6), 851–868. https://doi.org/10.1111/j.1468-5957.1996.tb01155.x

Chen, A.-S., Chu, H.-H., Hung, P.-H., & Cheng, M.-S. (2018). Financial risk and acquirers’ stockholder wealth in mergers and acquisitions. North American Journal of Economics and Finance (in Press). https://doi.org/10.1016/j.najef.2018.07.016

Cheng, Y. (2019). Empirical research on mergers’ leverage dynamics and post-merger integration duration. Managerial Finance, 45(10/11), 1488–1507. https://doi.org/10.1108/MF-05-2018-0196

Clark, K., & Ofek, E. (1994). Mergers as a means of restructuring distressed firms: An empirical investigation. Journal of Financial and Qualitative Analysis, 29(4), 541–565. https://doi.org/10.2307/2331109

Cornett, M., & Tehnarian, H. (1992). Changes in corporate performance associated with bank acquisitions. Journal of Financial Economics, 31(2), 211–234. https://doi.org/10.1016/0304-405X(92)90004-H

Cosh, A., Hughes, A., & Singh, A. (1980). The causes and effects of takeovers in the U.K.: An empirical investigation for the late 1960s at the microeconomic level. In D. Mueller (Ed.), The determinants and effects of merger: An international comparison. Gunn & Horn Publications.

Daddikar Prasad, V., & Shaikh, A. R. (2014). Impact of mergers & acquisitions on surviving firm’s financial performance: A study of Jet Airways Ltd. Pacific Business Review International, 6(8), 45–51. http://www.pbr.co.in/2014/2014_month/feb/7.pdf

Dargenidou, C., Gregory, A., & Hua, S. (2016). How far does financial reporting allow us to judge whether M&A activity is successful? Accounting and Business Research, 46(5), 467–499. https://doi.org/10.1080/00014788.2016.1182702

Dickerson, A., Gibson, H., & Tsakalotos, E. (1997). The impact of acquisitions on company performance: Evidence from a large panel of U.K. firms. Oxford Economic Papers, 49(3), 344–361. https://doi.org/10.1093/oxfordjournals.oep.a028613

Dimopoulos, T., & Sacchetto, S. (2017). Merger activity in industry equilibrium. Journal of Financial Economics, 126(1), 200–226. https://doi.org/10.1016/j.jfineco.2017.06.014

Duggal, N. (2015). Post merger performance of acquiring firms: A case study on Indian pharmaceutical industry. International Journal of Research in Management and Business Studies, 2(3), 24–28. http://ijrmbs.com/vol2issue3/neha.pdf

Edi, E., & Rusadi, S. (2017). Analisis pengukuran kinerja keuangan pasca merger dan akuisisi pada perusahaan yang terdaftar di bei. Jurnal Benefita, 2(3), 230–242. https://doi.org/10.22216/jbe.v2i3.1435

Fischer, M. (2017). The source of financing in mergers and acquisitions. Quarterly Review of Economics and Finance, 65(1), 227–239. https://doi.org/10.1016/j.qref.2017.01.003

Francis, J., & Martin, X. (2010). Acquisition profitability and timely loss recognition. Journal of Accounting and Economics, 49(1–2), 161–178. https://doi.org/10.1016/j.jacceco.2009.09.003

Fu, L., & Wang, Q. (2019). Driving factors of merger momentum in China: Empirical evidence from listed companies. China Finance Review International, 9(2), 235–253. https://doi.org/10.1108/CFRI-06-2017-0153

Ghosh, A. (2001). Does operating performance really improve following corporate acquisitions? Journal of Corporate Finance, 7(2), 151–178. https://doi.org/10.1016/S0929-1199(01)00018-9

Golubov, A., Petmezas, D., & Travlos, N. (2013). Empirical mergers and acquisitions research: A review of methods, evidence and managerial implications. In A. Bell, C. Brooks, & M. Prokopczuk (Eds.), Handbook of research methods and applications in empirical finance (pp. 287–313). Edward Elgar Publishing. https://doi.org/10.4337/9780857936097.00021

Grigorieva, S. (2020). How M&A deals influence corporate performance in developed and emerging capital markets: A review of empirical results in the literature. In I. Ivashkovskaya, S. Grigorieva, & E. Nivorozhkin (Eds.), Strategic deals in emerging capital markets. Aadvanced studies in emerging markets finance (pp. 33–61). Springer. https://doi.org/10.1007/978-3-030-23850-6_2

Gupta, B., & Banerjee, P. (2017). Impact of merger and acquisitions on financial performance: Evidence from selected companies in India. International Journal of Commerce and Management Research, 3(1), 14–19. http://www.managejournal.com/up/conference/20170210153824.pdf

HaiYue, L., YiXian, L., Rui, Y., & XiaoPing, L. (2021). How do Chinese firms perform before and after cross-border mergers and acquisitions? Emerging Markets Finance and Trade, 57(2), 348–364. https://doi.org/10.1080/1540496X.2018.1556636

Healy, P., Palepu, K., & Ruback, R. (1992). Does corporate performance improve after mergers? Journal of Financial Economics, 31(2), 135–175. https://doi.org/10.1016/0304-405X(92)90002-F

Hoshino, Y. (1982). The performance of corporate mergers in Japan. Journal of Business Finance & Accounting, 9(2), 153–165. https://doi.org/10.1111/j.1468-5957.1982.tb00982.x

Hu, M., & Yang, J. (2016). The role of leverage in cross-border mergers and acquisitions. International Review of Economics and Finance, 43(1), 170–199. https://doi.org/10.1016/j.iref.2015.10.039

Hu, N., Zhang, Y., & Tan, S. (2016). Determinants of Chinese cross-border M&As. Annals of Economics and Finance, 17(1), 209–233. http://aeconf.com/Articles/May2016/aef170110.pdf

Hummel, J., & Amiryany, N. (2015). Determinants of acquisition performance: A multi-industry analysis. In J. Humell & N. Amiryany (Eds.), Advances in mergers and acquisitions (pp. 143–169). https://doi.org/10.1108/S1479-361X20150000014009

Ibrahim, Y., & Raji, J. O. (2018). Cross-border merger and acquisition activities in Asia: The role of macroeconomic factors. Studies in Economics and Finance, 35(2), 307–329. https://doi.org/10.1108/SEF-06-2017-0146

Kumar, M. (1984). Growth, acquisition and investment. Cambridge University Press.

Kusewitt, J. (1985). An explanatory study of strategic acquisition factors relating to performance. Strategic Management Journal, 6(2), 151–169. https://doi.org/10.1002/smj.4250060205

Lakstutiene, A., Stankeviciene, J., Norvaisiene, R., & Narbutiene, J. (2015). The impact of acquisitions on corporate performance results during the period of economic slowdown: Case of Lithuania. Procedia – Social and Behavioral Sciences, 213, 455–460. https://doi.org/10.1016/j.sbspro.2015.11.433

Lebedev, S., Peng, M., Xie, E., & Stevens, C. (2015). Mergers and acquisitions in and out of emerging economies. Journal of World Business, 50(1), 651–662. https://doi.org/10.1016/j.jwb.2014.09.003

Lev, B., & Mandelker, G. (1972). The microeconomic consequences of corporate mergers. Journal of Business, 45(1), 85–104. https://www.jstor.org/stable/2351600

Manson, S., Stark, A., & Thomas, H. (1995). A cash flow analysis of operational gains from takeovers (Certified Research Report 35). The Chartered Association of Certified Accountants, London, UK.

Meeks, G. (1977). Disappointing marriage: A study of the gains from merger (University of Cambridge: Occasional Paper 51). Cambridge University Press.

Meglio, O., & Risberg, A. (2011). The (mis)measurement of M&A performance-A systematic narrative literature review. Scandinavian Journal of Management, 27(4), 418–433. https://doi.org/10.1016/j.scaman.2011.09.002

Mensah, E., & Onumah Mensah, J. (2017). Mergers and acquisitions in the era of globalization: The Ghanaian experience. Journal of Accounting and Finance, 17(3), 96–114. https://www.articlegateway.com/index.php/JAF/article/view/959/905

Mohanty, L. (2016). Corporate restructuring & acquiring firms’ performance: An empirical study of few selected firms of oil & gas sector in India. Srusti Management Review, 9(1), 1–10. http://srustimanagementreview.ac.in/paper_detail.php?id=MjUy

Mueller, D. (1980). The determinants and effects of merger: An international comparison. Gunn & Horn Publications.

Nagasha, S., Bananuka, J., Musimenta, D., & Lulu, G. (2017). The impact of merger and acquisition on firm performance in East Africa. Makerere Business Journal, 13(2), 109–128. https://www.researchgate.net/publication/321977755_The_Impact_of_Merger_and_Acquisition_on_Firm_Performance_in_East_Africa

Oduro, M. I., & Agyei, K. S. (2013). Mergers & acquisition and firm performance: Evidence from the Ghana stock exchange. Research Journal of Finance and Accounting, 4(7), 99–107. https://iiste.org/Journals/index.php/RJFA/article/view/6279/6644

Pantelidis, P., Pazarskis, M., Drogalas, G., & Zezou, S. (2018). Managerial decisions and accounting performance following mergers in Greece. Investment Management and Financial Innovations, 15(1), 263–276. https://doi.org/10.21511/imfi.15(1).2018.22

Pazarskis, M., Drogalas, G., & Koutoupis, A. (2018). Mergers and accounting performance: Some evidence from Greece during the economic crisis. Accounting and Management Information Systems, 17(1), 31–45. https://doi.org/10.24818/jamis.2018.01002

Pervan, M., Višić, J., & Barnjak, K. (2015). The impact of M&A on company performance: Evidence from Croatia. Procedia Economics and Finance, 23, 1451–1456. https://doi.org/10.1016/S2212-5671(15)00351-2

Polemis, D., & Karlis, T. (2016). Measuring post-merger and acquisition performance of corporations in the Maritime transport sector. SPOUDAI Journal of Economics and Business, 66(3), 83–93. http://spoudai.unipi.gr/index.php/spoudai/article/viewFile/2552/2620

Ramaswamy, K. P., & Waegelein, J. (2003). Firm financial performance following mergers. Review of Quantitative Finance and Accounting, 20(1), 115–126. https://doi.org/10.1023/A:1023089924640

Rao-Nicholson, R., Salaber, J., & Cao, T. H. (2016). Long-term performance of mergers and acquisitions in ASEAN countries. Research in International Business and Finance, 36(1), 373–387. https://doi.org/10.1016/j.ribaf.2015.09.024

Ravenscraft, D. J., & Scherer, F. M. (1989). The profitability of mergers. International Journal of Industrial Organization, 7(1), 101–116. https://doi.org/10.1016/0167-7187(89)90048-9

Rodionov, I., & Mikhalchuk, V. (2020). Domestic M&As in Russia: Performance and success factors. In I. Ivashkovskaya, S. Grigorieva, & E. Nivorozhkin (Eds.), Strategic deals in emerging capital markets. Aadvanced studies in emerging markets finance (pp. 189–220). Springer. https://doi.org/10.1007/978-3-030-23850-6_8

Salter, M., & Weinhold, W. (1979). Diversification through acquisition; strategies for creating economic value. Free Press.
Sharma, D., & Ho, J. (2002). The impact of acquisitions on operating performance: Some Australian evidence. Journal of Business Finance & Accounting, 29(1–2), 155–200. https://doi.org/10.1111/1468-5957.00428

Strasek, S., & Gubensek, A. (2016). A pre- and post-acquisition performance of acquired firms in a small transition economy. Actual Problems in Economics, 4(2), 133–142. http://nbuv.gov.ua/UJRN/ape_2016_4_20

Sun, Z., Vinig, T., & Daniël Hosman, T. (2017). The financing of Chinese outbound mergers and acquisitions: Is there a distortion between state-owned enterprises and privately owned enterprises? Research in International Business and Finance, 39(A), 377–388. https://doi.org/10.1016/j.ribaf.2016.09.005

Tanna, S., & Yousef, I. (2019). Mergers and acquisitions: Implications for acquirers’ market risk. Managerial Finance, 45(4), 545–562. https://doi.org/10.1108/MF-09-2018-0446

Tao, F., Liu, X., Gao, L., & Xia, E. (2017). Do cross-border mergers and acquisitions increase short-term market performance? The case of Chinese firms. International Business Review, 26(1), 189–202. https://doi.org/10.1016/j.ibusrev.2016.06.006

Tao, Q., Sun, W., Zhu, Y., & Zhang, T. (2017). Do firms have leverage targets? New evidence from mergers and acquisitions in China. North American Journal of Economics and Finance, 40(1), 41–54. https://doi.org/10.1016/j.najef.2017.01.004

Triantafyllopoulos, Y., & Mpourletidis, K. (2014). Mergers and acquisitions and economic crisis. A case study approach from a qualitative analysis in Greece. Procedia – Social and Behavioral Sciences, 148, 437–445. https://doi.org/10.1016/j.sbspro.2014.07.063

Wilson, M. K., & Vencatachellum, D. J.-M. (2019). Global financial markets, natural resources and cross-border mergers and acquisitions in Africa. Journal of African Business, 20(1), 1–21. https://doi.org/10.1080/15228916.2019.1693220

Yanan, E. M., Hamza, S. Μ., & Basit, Α. (2016). Impact of merger and acquisitions on firms financial performance: A study on United States of America. International Journal of Accounting and Business Management, 4(2), 159–168. http://www.ftms.edu.my/journals/pdf/IJABM/Nov2016/159-169.pdf

Yilmaz, I. S., & Tanyeri, B. (2016). Global merger and acquisition (M&A) activity: 1992–2011. Finance Research Letters, 17(1), 110–117. https://doi.org/10.1016/j.frl.2016.02.005

Zhang, W., Wang, K., Li, L., Chen, Y., & Wang, X. (2018). The impact of firms’ mergers and acquisitions on their performance in emerging economies. Technological Forecasting and Social Change, 135(1), 208–216. https://doi.org/10.1016/j.techfore.2018.05.015