An empirical investigation of UK mergers and acquisitions 1980-90
type: CreativeWork
description: An important part of this study is the attempt to reconcile the contradictory findings about mergers and acquisitions reported in the financial economics and the industrial economics literatures. This is done by using both share price and accounting data, an approach not used in previous work. Financial economics characterises the market for corporate control as rival management teams competing for control over corporate assets. Takeovers represent a necesssary external discipline, whereby inferior management is displaced by those with superior management skills. Using share price data, most empirical studies support this characterisation and mergers as efficiencyenhancing transactions. In contrast, studies in the industrial economics literature have used accounting data to show that acquiring firms do not exhibit superior pre-merger performance and that mergers generally result in a decline in profitability post-merger. Results from the first phase of the empirical work tends to support the latter view, with a certain degree of compatibility between results with accounting data and those with share price data. At this stage the disciplinary hypothesis is not supported. Another important part of this study investigates the impact of business and merger cycles on merger outcomes at the level of the firm. This work is prompted by the failure of previous studies to take account of the empirical literature on the modelling of merger cycles. The importance of calendar time is confirmed by the results obtained. The full 1980-90 sample incorporates different phases of the business and merger cycles and the results with both accounting and share price data for this period are similar but rather inconclusive. I lowever, when the sample is divided to reflect different phases of the business and merger cycles a very different picture emerges. In the period 1980-85 when takeover activity was low and competitive pressures in product markets were intense, acquiring firms on avera…
abstract: An important part of this study is the attempt to reconcile the contradictory findings about mergers and acquisitions reported in the financial economics and the industrial economics literatures. This is done by using both share price and accounting data, an approach not used in previous work. Financial economics characterises the market for corporate control as rival management teams competing for control over corporate assets. Takeovers represent a necesssary external discipline, whereby inferior management is displaced by those with superior management skills. Using share price data, most empirical studies support this characterisation and mergers as efficiencyenhancing transactions. In contrast, studies in the industrial economics literature have used accounting data to show that acquiring firms do not exhibit superior pre-merger performance and that mergers generally result in a decline in profitability post-merger. Results from the first phase of the empirical work tends to support the latter view, with a certain degree of compatibility between results with accounting data and those with share price data. At this stage the disciplinary hypothesis is not supported. Another important part of this study investigates the impact of business and merger cycles on merger outcomes at the level of the firm. This work is prompted by the failure of previous studies to take account of the empirical literature on the modelling of merger cycles. The importance of calendar time is confirmed by the results obtained. The full 1980-90 sample incorporates different phases of the business and merger cycles and the results with both accounting and share price data for this period are similar but rather inconclusive. I lowever, when the sample is divided to reflect different phases of the business and merger cycles a very different picture emerges. In the period 1980-85 when takeover activity was low and competitive pressures in product markets were intense, acquiring firms on avera…
author: Archbold, J.S.
keywords: HB Economic Theory
date published: 1998-06
date modified: 2026-07-24T01:39:04Z
provider: City University of London
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: City University London