Impact of Characteristics of Acquiring and Acquired Firms on the Performance of Mergers and Acquisitions

Mehdi Rasouli Ghahroudi () and Soheila Shahidi Asl ()
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Mehdi Rasouli Ghahroudi: Department of Internetional Business Management, Institute for Management and Planning Studies (IMPS), Tehran, Iran.
Soheila Shahidi Asl: Internetional Business Management, Department of Internetional Business Management, Institute for Management and Planning Studies (IMPS), Tehran, Iran.

Management and Development Process Quarterly (٠صلنامه ٠رایند مدیریت و توسعه), 2022, vol. 34, issue 4, 145-185

Abstract: Purpose: The purpose of this study is to examine the effects of the acquiring and acquired firms in the context of governance and firm factors on the performance of mergers and acquisitions (M&A) based on the dimensions of Earnings per Share (EPS) and Cumulative Abnormal Return (CAR) growth. Methodology: Regarding the methodology, this applied and survey research was empirical and descriptive. The statistical population included all active firms listed in Tehran Stock Exchange. The sample consisted of blocked trading data related to mergers and acquisitions in the stock exchange. As a result, the final sample included 198 listed M&A firms. Findings: Results show that the acquiring firms’ characteristics, ownership of institutional investors, rate of return on assets and rate of return on equity of shareholders positively and significantly affect M&A’s performance. In addition, the total assets and trans-industrial nature of acquiring firms positively and significantly affect the performance of merged and acquired firms. Furthermore, the buyer’s institutional ownership, amount of acquired ownership, size of the board and size of the non-executive board, as well as their experience at the time of deal positively and significantly affect the performance of merged and acquired firms. The age of the companies at the time of the deal is also an issue which has its own impact. ` Originality: Our research has valuable contributions to the theory of stewardship, agency theory, and resource-based view, which are comprehensively presented in five panels to measure their impact on the performance of mergers and acquisitions. Implications: According to the results, governance and firm factors of acquiring firms impact the likelihood success of M&A transaction. Moreover, the necessity of high value of transparency of companies' financial information during mergers and acquisitions has been confirmed.

Keywords: Merger and Acquisition (M&A); Stock Market; Dual-Job Management; Institutional Ownership; Acquirer and Acquired Firms. (search for similar items in EconPapers)
Date: 2022
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