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The Impact of Acquisitions on Firms' Financial Health: An Analysis of Managerial Ability
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Younes Badavar Nahandi *   , Nasrin Jannaty Fesagandisi |
| Department of Accounting, Tabriz Branch, Islamic Azad University |
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Abstract: (57 Views) |
This study examines the impact of acquisitions on the financial performance of target companies with an emphasis on the role of managerial ability in Iran for the first time. To achieve this goal, a sample of 71 publicly listed companies that underwent major and block-share acquisitions from 1389 to 1400, resulting in changes in primary ownership and management, was selected. These companies, identified as being in financial distress or bankruptcy according to the Kurdestani and Tutley (2014) model, served as the target group. A control group of 71 other financially distressed or bankrupt listed companies that did not undergo acquisitions during the same period was also selected. The financial health index of the companies was calculated using a bankruptcy formula, and managerial ability was assessed based on the Demerjian et al. (2012) model. The findings reveal that acquisitions have a positive and significant effect on the financial health of firms in the years following the acquisition. Moreover, managerial ability in acquired companies has a significant positive impact on their financial health at the 5% level. Comparing the average financial health using paired t-tests and managerial ability using binomial tests over the two years before and after the acquisitions confirms that both acquisitions and managerial ability significantly improve firms' financial health within the two years post-acquisition. Therefore, it can be concluded that acquisitions positively influence financial health in subsequent years, and skilled managers play a crucial role in enhancing the financial health of firms. |
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| Keywords: Financial health, managerial ability, acquisitions, financial distress |
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Full-Text [PDF 1447 kb]
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Type of Study: Research |
Subject:
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