Firm-level recent profitability and acquisition performance: exploring competing theoretical perspectives

Ilaria Galavotti*

*Corresponding author

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

In light of the mixed findings upon whether good performers are good or bad acquirers, this paper explores the relationship between firm-level recent profitability and post-acquisition performance through the competing analysis of the managerial ability and the hubris hypotheses. The paper also builds on the organizational learning literature to examine the moderating effect played by a firm’s previous acquisition experience, as a potential contingency factor that may alter the performance effects of acquisitions. Based on a dataset of 469 acquisitions completed between 2007 and 2013, results provide support to the managerial ability hypothesis, according to which good performing firms exhibit better post-acquisition returns. Results also support the existence of learning benefits from previous acquisition experience, which further enhances the positive effect played by an acquirer’s recent profitability on post-acquisition performance.
Original languageEnglish
Pages (from-to)319-345
Number of pages27
JournalEurasian Business Review
Volume9
DOIs
Publication statusPublished - 2019

Keywords

  • Acquisition experience
  • Firm profitability
  • Hubris
  • Managerial ability
  • Post-acquisition performance

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