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Mergers and acquisitions: does performance depend on managerial ability?

Diah Hari Suryaningrum1, Abdul Aziz Abdul Rahman2, Abdelrhman Meero2

  • 1Department of Accounting, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jawa Timur, Surabaya, Indonesia.

Journal of Innovation and Entrepreneurship
|May 18, 2023
PubMed
Summary
This summary is machine-generated.

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Managerial ability significantly boosts mergers and acquisitions (M&A) success, improving both operating performance and stock returns. High acquirer managerial competence ensures long-term M&A value for investors.

Area of Science:

  • Business and Management
  • Financial Economics

Background:

  • Companies facing financial distress often pursue mergers and acquisitions (M&A) for survival.
  • Effective resource management and strategic decision-making by managers are crucial for maintaining competitiveness and sustainable advantages.
  • The success of M&A activities is heavily influenced by the acquirer's managerial capabilities.

Purpose of the Study:

  • To investigate the influence of acquirer's managerial ability on M&A performance.
  • To analyze the short-term and long-term effects of managerial ability on M&A outcomes.
  • To examine how M&A type moderates the relationship between managerial ability and firm performance.

Main Methods:

  • Utilized a sample of 153 M&A cases from Indonesian companies (2010-2017), with performance data extending to 2020.
Keywords:
IndonesiaManagerial abilityMergers and acquisitionsShort- and long-term performance

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  • Employed regression and difference analysis to evaluate the impact of managerial ability.
  • Assessed short-term and long-term performance using the market-to-book ratio (MTBR) for operating performance and buy-and-hold abnormal return (BHAR) for stock return performance.

    • Main Results:

    • Managerial ability demonstrates a positive correlation with both MTBR (operating performance) and BHAR (stock return performance).
    • Higher managerial ability in acquirers leads to improved short-term and long-term M&A success.
    • The findings indicate that managerial competence is a key determinant of post-M&A financial outcomes.

    Conclusions:

    • Managerial ability is a critical factor for successful mergers and acquisitions, impacting both operational efficiency and shareholder value.
    • Investors should consider the managerial competence of acquiring firms when making investment decisions.
    • This research contributes to M&A literature by empirically demonstrating the significant role of managerial ability in Indonesian M&A performance.