Accounting measures of operating performance outcomes for Australian mergers

Purpose The purpose of this paper is to analyse success at the corporate level for 72 Australian mergers between publicly listed firms during the period 1999-2004, and to reassess evidence in earlier Australian studies that contrasts findings from other countries which report a decline in post-merger operating performance. Design/methodology/approach A number of accounting operating performance measures for profitability, cash flow, efficiency, leverage and growth are used to proxy for the success of the merger, which is defined in terms of an improvement in each merged firm's industry-adjusted operating performance between the pre and post-merger period. Both non-parametric and parametric comparisons of these measures are presented. Findings Some evidence that mergers improve the operating performance of the post-merger firm is found. Industry adjusted profitability, cash flows, efficiency and leverage measures were higher in the post-merger period. Research limitations/implications The findings of this study are limited by the small sample size, the focus on listed firms, and the use of only operating financial measures of merger success. Future research could examine more mergers over a longer time period, use alternative methods of performance benchmarking, and use alternative measures of merger success, such as share price performance. Originality/value Australian mergers led to improved corporate performance during the period 1999-2004. This result is consistent with findings in other countries but has not been found in prior Australian research.