Firm-level recent profitability and acquisition performance: exploring competing theoretical perspectives

Ilaria Galavotti ()
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Ilaria Galavotti: Università Cattolica del Sacro Cuore

Eurasian Business Review, 2019, vol. 9, issue 3, No 4, 319-345

Abstract: Abstract In light of the mixed findings upon whether good performers are good or bad acquirers, this paper explores the relationship between firm-level recent profitability and post-acquisition performance through the competing analysis of the managerial ability and the hubris hypotheses. The paper also builds on the organizational learning literature to examine the moderating effect played by a firm’s previous acquisition experience, as a potential contingency factor that may alter the performance effects of acquisitions. Based on a dataset of 469 acquisitions completed between 2007 and 2013, results provide support to the managerial ability hypothesis, according to which good performing firms exhibit better post-acquisition returns. Results also support the existence of learning benefits from previous acquisition experience, which further enhances the positive effect played by an acquirer’s recent profitability on post-acquisition performance.

Keywords: Firm profitability; Acquisition experience; Post-acquisition performance; Managerial ability; Hubris (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s40821-018-0111-2

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