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Unveiling the Endogenous Relationship Between Technical Efficiency and Value Creation in Mergers and Acquisitions in Nigeria
Author(s) -
Akpan Mfon,
Wanke Peter,
Chen Zhongfei,
Antunes Jorge Moreira
Publication year - 2020
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/saje.12233
Subject(s) - endogeneity , returns to scale , economics , value (mathematics) , econometrics , scale (ratio) , value creation , mergers and acquisitions , industrial organization , horizontal and vertical , point (geometry) , instrumental variable , frontier , microeconomics , business , production (economics) , statistics , mathematics , finance , physics , geometry , archaeology , quantum mechanics , history
There is a growing literature on how the beneficial impacts of horizontal mergers and acquisitions (M&A) should be measured. Thus far, however, there have been few studies addressing endogeneity between technical efficiency and value creation: they tend to present a bidirectional and simultaneous relationship. This research contributes to the debate by investigating the impact of voluntary horizontal M&A on these metrics in Nigeria between 1995 and 2012, in light of the individual performance of bidders, targets, and the resulting corporate companies. First, technical efficiency, technology gap ratio, and returns‐to‐scale estimates were computed based on a meta‐frontier DEA approach, together with a set of contextual variables that encompass performance indicators which reflect the value creation process. Then, robust regressions were used to discriminate these efficiency estimates in terms of such business‐related variables, correcting for endogeneity and controlling for industry and trend effects. The results reveal that these contextual variables significantly impact virtual efficiency and returns‐to‐scale levels, and that there is a trade‐off between efficiency and value creation at some point in the merging process. Managerial implications are derived.