Mergers and Acquisitions: Some Empirical Evidence on Performance, Financial Characteristics and Firm Sustainability

Abstract

The study examines the performance and financial characteristics of non-financial companies (low and high sales growth companies) that were involved in mergers and acquisitions in Malaysia. Capital gains were used to measure the companies’ performance over a period of two years and profitability measures (ROE, EPS, dividends payout, gearing ratio, PE ratio) were incorporated in the study. Paired sample testing and independent t-test analyses were adopted. The study reveals that there is no significant difference in terms of performance between low and high sales growth of companies in the presence of economic shock. However, high sales growth companies which are small in size seem to be more vulnerable to economic shock compared to low sales growth companies. In terms of financial characteristics, statistically, there are no significant differences between the two groups but the low sales growth companies (which are large in size) tend to register higher returns to shareholders.