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Firm Financial Performance Following Mergers


This study, using a sample of 162 firms and industry-adjusted cash flow returns on market value of assets as performance criteria, examines the financial performance of the combined target and acquiring firms over a 5-year post-merger period in relation to the corresponding pre-merger period. We find that post-merger performance is negatively associated with relative target size and positively associated with long-term incentive compensation plans. Firms that are in dissimilar industries also show improved performance, as do firms that merged prior to 1983.

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Correspondence to James F. Waegelein.

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Ramaswamy, K.P., Waegelein, J.F. Firm Financial Performance Following Mergers. Review of Quantitative Finance and Accounting 20, 115–126 (2003).

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