emperical research on mergers and corporate performance
TRANSCRIPT
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Empirical Research on mergers and corporate performance in India
Anand Kumar AdeppaSMBA10003
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Study
• Abnormal returns to Shareholders during the time
• Reported financial results before merging• Reflections of stock prices at the time of
acquisition announcement
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Review by B Lev and G Mandekar
No significant difference in• Profitability of firms with related and
unrelated diversification.Superior profitability with related mergers
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Analysis
• 57 large mergers between 1995 and 2002Sample • 10% of own asset size• Financial data for 3 years• Not more than 4 mergers in a financial yearDesign Problems• Systematic difference in size• Acquisitions on above normal performance
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Methodology
Part A• Operating cash flows• Market value base• Merger Financing • Comparing post Merger and Pre Merger DataPart B• Same with denominator with book value of
assets and sales
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Post Merger performance
Median Changes in Cash flows and Assets
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Cash Flow Return on Market Value of Assets
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Cross Sectional Regression results
• Estimation
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Final Summary
The study was to measure the cash flows after mergers in terms of
• Market value of Assets• Book Value of Assets• Sales ValueBook value and Sales Value indicate that
operating performance improves but market value does not support the above hypothesis.