A Study on the Short-Run Profitability of Acquirer Firms in India

Dr. Ramachandran Azhagaiah ., T. Sathish Kumar .

Abstract


Corporate merger and acquisitions (M&As) reached their peak in the twenty-first century. The M&As have become one of the competitive strategies for external growth.  In general, it is believed that M&As can create synergies. Much of the research has focused on performance evaluation, shareholder equity allocation, or even the increase of company market value after the M&As.  The present study is impact of business restructuring on the profitability: An empirical analysis with special focus on Chemical Industry in India with a sample of 10 chemical firms listed in one of the leading Indian stock exchanges namely Bombay Stock Exchange out of 23  firms which have undergone M&As in the same industry during  2007. A comparison of the post-merger performance of the sample acquirer firms by use of profitability measures (gross profit ratio, operating profit ratio and net profit ratios) and paired ‘t’ test during the study period of three years before and three years after the period of M&As. The study proves that the Chemical Industry’s overall profitability is significantly increased after the merger supported by‘t’ test.


Keywords


Acquisition; Business Restructuring; Corporate Restructuring; Merger; Merger & Acquisition; Post-Merger Profitability; Short-Run Profitability; Profitability of Chemical Industry

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References


Akben-Selcuk E. and Altiok-Yilmaz A. (2011), “The impact of mergers and acquisitions on acquirer performance: Evidence from Turkey”, Business and Economics Journal, Vol. BEJ-22 pp 1-8.

Muhammad Usman Kemal (2011), “Post-merger profitability: A case of Royal Bank of Scotland (RBS)”, International Journal of Business and Social Science, Vol. 2 No. 5 pp 157-62.

Pramod Mantravadi and Vidyadhar Reddy A. (2008), “Post-merger performance of acquiring firms from different industries in India”, International Research Journal of Finance and Economics Issue 22. pp 192-204.

Rajesh Kumar B and Panneerselvam S. (2009), “Mergers acquisitions and wealth creation: A comparative study in the Indian context”, IIMB Management Review, September, pp 222-44.

Rogowaski R and Simonson D. (1987), “Bank merger pricing premiums and interstate bidding”, Paper presented at the Financial Management Meetings in Las Vegas.


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