An empirical study of target firms' operating performance after corporate acquisitions: Evidence from the listed companies in the Stock Exchange of Thailand.

摘要

The problem. This study examined the impact of acquisitions on target firms in the Thailand stock exchange market during the 10-year period 1995 to 2004. This study focused on three specific aspects of the impact of acquisitions: (a) to examine the short-term impact of acquisitions during the acquisition announcement by looking at stock market reaction, (b) to examine the long-term impact of acquisitions by looking at operating performance of target firms, and (c) to investigate the relationship between short-term performance of target firms toward acquisition announcement and long-term operating performance of target firms during the post-acquisition period.; Method. The study explored 40 listed target firms from the Stock Exchange of Thailand (SET). The event study method was used to investigate the short-term impact of acquisitions during acquisition announcement. The mean operating cash flow ratio was used as a measurement for operating performance of target firms in both pre- and post-acquisition period. A one-way analysis of variance and t test were used to investigate the long-term impact of acquisitions on operating performance of target firms during pre- and post-acquisition periods. A Pearson correlation test and regression analysis were used to identify direction and strength of relationships between short-term (abnormal returns) impact of acquisitions, long-term (operating performance) impact of acquisitions, and each of six variables.; Results. The results showed positive abnormal returns during acquisition announcement. Type of payment used in tender offer affected the level of abnormal returns received by shareholders. The acquisition process did not improve operating performance of target firms; however, there was a significant difference in operating performance during the post-acquisition period between target firms generated by institutional and individual investors. Tobin Q ratio, leverage ratio, and target firm size correlated with abnormal returns of target firms, and the six variables, taken together, explained 28.6% of the variance in abnormal returns of target firms. Moreover, Tobin Q ratio and target firm size correlated with operating performance of target firms; the six variables, taken together, explained 30.4% of the variance in operating performance of target firms. There was a positive relationship between short-term and long-term impact of acquisitions.