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Do mergers and acquisitions improve firms' financial performance? The case of the U.S. generic drug industry

Antonio J. Trujillo, Emmanuel E. Garcia‐Morales, Gabriel Kabarriti and Gerard Anderson

Managerial and Decision Economics, 2020, vol. 41, issue 1, 10-24

Abstract: This paper examines the financial performance of all mergers and acquisitions (M&A) involving publicly traded companies that occurred in the U.S. generic drug industry from 1996 to 2017. The control group was chosen using a nearest neighbor matching procedure. Our empirical strategy controls for unobservable firm‐specific fixed effects as well M&A fixed effects. Our findings suggest that profit levels do not change significantly following M&As, but total revenues decline after M&As. Firms undergoing an M&A cut operating expenses but not through reduction in labor expenses or number of employees.

Date: 2020
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