TITLE:
An Empirical Study on M&A Performance: Evidence from Horizontal Mergers and Acquisitions in the United States
AUTHORS:
Jinling Jiang
KEYWORDS:
Horizontal Mergers and Acquisitions, Merger Performance, Event Study
JOURNAL NAME:
Open Journal of Business and Management,
Vol.7 No.2,
April
26,
2019
ABSTRACT: Synergy
theory holds that horizontal mergers and acquisitions (M&A) are conducted
to obtain economies of scale. Horizontal M&A help companies restructure
assets and resources, thereby improving the efficiency of management.
Technology diffusion from the same industry help companies complement each
other in R&D and improve product quality and efficiency. In addition,
horizontal M&A can eliminate duplicate labor and achieve efficient use of
equipment, thereby reducing fixed production costs. Scholars have made fruitful
researches on the motives of horizontal M&A, and tend to agree that companies
can profit from horizontal M&A. There are mixed results of empirical
research on the effect of horizontal
M&A, and cases of M&A failure occur from time to time. Whether
horizontal M&A can achieve the desired results of managers? This paper
chooses the horizontal M&A events between 1995 and 2005 when both sides of
M&A are listed companies in the United States. Event study method is used
to compare the volatility of stock prices in the event window of each participant
to test the short-term performance of horizontal M&A. The empirical
results of this paper show that the stock market in the United States has
responded about a week before the announcement date of horizontal M&A due
to the lack of standardization of information disclosure or inadequate
regulatory means. Horizontal M&A enhance the shareholder wealth of the
targets in the short term, while cause loss of shareholder wealth of the
bidders on the announcement day of M&A.