Accounting measures of operating performance outcomes for Australian mergers

Accounting measures of operating performance outcomes for Australian mergers Purpose – The purpose of this paper is to analyse success at the corporate level for 72 Australian mergers between publicly listed firms during the period 1999‐2004, and to reassess evidence in earlier Australian studies that contrasts findings from other countries which report a decline in post‐merger operating performance. Design/methodology/approach – A number of accounting operating performance measures for profitability, cash flow, efficiency, leverage and growth are used to proxy for the success of the merger, which is defined in terms of an improvement in each merged firm's industry‐adjusted operating performance between the pre and post‐merger period. Both non‐parametric and parametric comparisons of these measures are presented. Findings – Some evidence that mergers improve the operating performance of the post‐merger firm is found. Industry adjusted profitability, cash flows, efficiency and leverage measures were higher in the post‐merger period. Research limitations/implications – The findings of this study are limited by the small sample size, the focus on listed firms, and the use of only operating financial measures of merger success. Future research could examine more mergers over a longer time period, use alternative methods of performance benchmarking, and use alternative measures of merger success, such as share price performance. Originality/value – Australian mergers led to improved corporate performance during the period 1999‐2004. This result is consistent with findings in other countries but has not been found in prior Australian research. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Accounting Research Emerald Publishing

Accounting measures of operating performance outcomes for Australian mergers

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0967-5426
DOI
10.1108/09675420810919720
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to analyse success at the corporate level for 72 Australian mergers between publicly listed firms during the period 1999‐2004, and to reassess evidence in earlier Australian studies that contrasts findings from other countries which report a decline in post‐merger operating performance. Design/methodology/approach – A number of accounting operating performance measures for profitability, cash flow, efficiency, leverage and growth are used to proxy for the success of the merger, which is defined in terms of an improvement in each merged firm's industry‐adjusted operating performance between the pre and post‐merger period. Both non‐parametric and parametric comparisons of these measures are presented. Findings – Some evidence that mergers improve the operating performance of the post‐merger firm is found. Industry adjusted profitability, cash flows, efficiency and leverage measures were higher in the post‐merger period. Research limitations/implications – The findings of this study are limited by the small sample size, the focus on listed firms, and the use of only operating financial measures of merger success. Future research could examine more mergers over a longer time period, use alternative methods of performance benchmarking, and use alternative measures of merger success, such as share price performance. Originality/value – Australian mergers led to improved corporate performance during the period 1999‐2004. This result is consistent with findings in other countries but has not been found in prior Australian research.

Journal

Journal of Applied Accounting ResearchEmerald Publishing

Published: Nov 14, 2008

Keywords: Operations management; Acquisitions and mergers; Cash flow; Australia

References

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