The Impact of Industry Commonality on Post-merger Performance

Abstract

The purpose of this paper is to identify the impact of industry commonality on post-merger performance and further examine whether the acquiring firms have the abnormal returns after mergers and acquisitions which is evidenced by many prior studies. Through the US sample of 3016 observations consisting of 1732 related and 1284 unrelated acquisitions from 1995 to 2009, we find that the abnormal returns of acquisitions during three years are all negative, but the post-performances of related acquisitions is significantly better than those of unrelated acquisitions. Moreover, while insignificant in the first year, the related acquisitions have significantly positive impact on market performances in the second and third years.