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AN EXAMINATION OF MERGER SYNERGISM
Author(s) -
Choi Dosoung,
Philippatos George C.
Publication year - 1983
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1983.tb00333.x
Subject(s) - shareholder , leverage (statistics) , diversification (marketing strategy) , business , industrial organization , monetary economics , empirical evidence , accounting , finance , economics , corporate governance , marketing , philosophy , epistemology , machine learning , computer science
The empirical research discussed in this paper measures the synergistic effects of mergers on the stockholders of the acquiring and acquired firms. Synergism is defined as the incremental wealth to the shareholders of both merging firms due to the merger—net of any potential gains achievable through investors' personal diversification over the common stocks of the merging firms. Three types of mergers are identified and studied—nonconglomerate, conglomerate with increasing financial leverage, and conglomerate with decreasing financial leverage. The results indicate that these types of mergers are affected differently by the combination. Moreover, the evidence suggests operational and/or financial synergism.