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How far does financial reporting allow us to judge whether M&A activity is successful?

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  • Christina Dargenidou
  • Alan Gregory
  • Shan Hua

Abstract

Evidence from share price returns suggests that acquisitions destroy value. On the other hand, evidence from accounting measures of performance suggests that acquisitions give rise to synergies and therefore potentially create value. In this paper, we first revisit the UK evidence using an updated sample, and confirm that these findings still hold, and importantly hold in the period following the introduction of FRS10. We then reconcile the (apparently conflicting) findings from these market-based and accounting-based approaches. Using accounting measures of performance, we confirm the presence of synergies developed during acquisitions. Finally we show that post-acquisition abnormal returns are associated with news of synergistic benefits conveyed in the financial statements.

Suggested Citation

  • Christina Dargenidou & Alan Gregory & Shan Hua, 2016. "How far does financial reporting allow us to judge whether M&A activity is successful?," Accounting and Business Research, Taylor & Francis Journals, vol. 46(5), pages 467-499, August.
    • Handle: RePEc:taf:acctbr:v:46:y:2016:i:5:p:467-499
    DOI: 10.1080/00014788.2016.1182702
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    2. George Marian AEVOAE, 2018. "How Can We Create Value From Enterprise Concentrations? A Meta-Analysis Of The Scientific Literature On M&As In The European Union," EURINT, Centre for European Studies, Alexandru Ioan Cuza University, vol. 5, pages 63-87.

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