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Do mergers and acquisitions improve firms' financial performance? The case of the U.S. generic drug industry
Author(s) -
Trujillo Antonio J.,
GarciaMorales Emmanuel E.,
Kabarriti Gabriel,
Anderson Gerard
Publication year - 2020
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3074
Subject(s) - unobservable , revenue , mergers and acquisitions , business , matching (statistics) , profit (economics) , industrial organization , monetary economics , control (management) , finance , microeconomics , economics , econometrics , management , statistics , mathematics
This paper examines the financial performance of all mergers and acquisitions (M&A) involving publicly traded companies that occurred in the U.S. generic drug industry from 1996 to 2017. The control group was chosen using a nearest neighbor matching procedure. Our empirical strategy controls for unobservable firm‐specific fixed effects as well M&A fixed effects. Our findings suggest that profit levels do not change significantly following M&As, but total revenues decline after M&As. Firms undergoing an M&A cut operating expenses but not through reduction in labor expenses or number of employees.