This study investigates the postmerger financial performance of acquiring firms in the lodging industry between 1985 and 2000. Jensen Measure Model and Market Model are used to examine long-term and short-term market measure of performance. Additionally, return on assets (ROA) and return on equity (ROE) are used to assess the accounting measures for the financial performance of acquiring firms. The results indicate that the shareholders of acquiring hotel companies earned no abnormal equity returns over the short term, which indicates no significant relationship between merger announcement and the change in short-term equity value. As opposed to general expectations, the study reveals that merger has a negative effect on the acquiring firms' equity values over the long term. Similarly, the ROA and ROE are found to become significantly lower after mergers. Overall, this study provides evidence that shareholders of acquiring hotel companies did not benefit from the mergers.
Agrawal, A., Jaffe, J.F., & Mandelker, G.M. (1992). The post-merger performance of acquiring firms: A re-examination of an anomaly. The Journal of Finance, 47(4), 1605-1621.
2.
Amihud, Y., Dodd, P., & Weinstein, M. (1986). Conglomerate mergers, managerial motives & stockholder wealth. Journal of Banking and Finance, 10(3), 401-410.
3.
Andrew, W. (1988). The effect of diversification by acquisition on hospitality firm value: An empirical analysis. Proceedings of the First Annual Research Symposium of the Association of Hospitality Financial Management Educators, 1, 15-26.
4.
Asquith, P. (1983). Merger bids, uncertainty, and stockholder returns . Journal of Financial Economics, 11(1-4), 51-83.
5.
Asquith, P., Bruner, R.F., & Mullins, D.W. (1983). The gains to bidder firms from merger. Journal of Financial Economics, 11(1-4), 121-139.
6.
Biggadike, R. (1979). The risky business of diversification. Harvard Business Review, 57(3), 103-111.
7.
Dickerson, A.P., Gibson, H.D., & Tsakalotos, E. (1997). The impact of acquisitions on company performance: Evidence from a large panel of UK firms. Oxford Economic Papers, 49(3), 344-361.
8.
Dodd, P. (1980). Merger proposals, management discretion and stockholder wealth. Journal of Financial Economics, 8(2), 105-137.
9.
Dodd, P., & Ruback, R. (1977). Tender offers and stockholders return: An empirical analysis. Journal of Financial Economics, 5(3), 351-373.
10.
Fox, B.E., & Fox, E.M. (1976). Corporate acquisitions and mergers. New York: Mathew Bender.
11.
Franks, J., Harris, R., & Timan, S. (1991). The post merger share-price performance of acquiring firms. Journal of Financial Economics, 29(1), 81-96.
12.
Healy, P.M., Palepu, K.G., & Ruback, R. (1992). Does corporate performance improve after mergers?Journal of Financial Economics, 31(2), 135-175.
13.
Ikeda, K., & Doi, N. (1983). The performance of merging firms in Japanese manufacturing industry: 1964-75. The Journal of Industrial Economics, 31(3), 257-266.
14.
Jarrell, G.A., & Poulsen, A.B. (1989). The returns to acquiring firms in tender offers: Evidence from three decades. Financial Management, 18(3), 12-19.
15.
Kwansa, F.A. (1994). Acquisitions, shareholder wealth and the lodging sector: 1980-1990. International Journal of contemporary Hospitality Management, 6(6), 16-20.
16.
Loderer, C., & Martin, K. (1992). Postacquisition performance of acquiring firms . Financial Management, 21(3), 69-79.
17.
Loughran, T., & Vijh, A.M. (1997). Do long-term shareholders benefit from corporate acquisitions?Journal of Finance, 52(5), 1765-1790.
18.
Lubatkin, M. (1983). Mergers and the performance of the acquiring firm . Academy of Management Review, 8(2), 218-225.
19.
Magenheim, E., & Mueller, D.C. (1988). On measuring the effect of mergers on acquiring firm shareholders. In J. Coffee, L. Loisenstein, & S. Rose-Ackerman (Eds.), Knights, raider and targets: The impact of the hostile takeover (pp. 171-193). New York: Oxford University Press.
20.
McKee, D.O., Varadarajan, P.R., & Pride, W.M. (1989). Strategic adaptability and firm performance: A market-contingent perspective. Journal of Marketing,53(3), 21-35.
21.
Meeks, G. (1977). Disappointing marriage: A study of the gains from merger. Cambridge, UK: Cambridge University Press.
22.
Michel, A., & Shaked, I. (1985). Evaluating merger performance. California Management Review, 27(3), 109-118.
23.
Muller, D., C. (1997). Merger policy in the United States: A reconsideration. Review of Industrial Organization , 12(5-6), 655-685.
24.
Raad, E., Ryan, R., & Sinkey, J.F., Jr. (1999). Leverage, ownership structure, and returns to shareholders of target and bidding firms. Quarterly Journal of Business and Economics, 32(2), 37-42.
25.
Ramaswamy, K.P., & Waegelein, J.F. (2003). Firm financial performance following mergers. Review of Quantitative Finance and Accounting , 20(2), 115-126.
26.
Scherer, F.M. (1988). Corporate takeovers: The efficiency arguments . Journal of Economic Perspectives, 2(1), 69-82.
27.
Sheel, A., & Nagpal, A. (2000). The post-merger equity value performance of acquiring firms in the hospitality industry. The Journal of HospitalityFinancial Management, 8(1), 37-45.
28.
Singh, A. (1971). Take-over. Cambridge, UK: Cambridge University Press.
29.
Utton, M. (1974). On measuring the effect of industry mergers. Scottish Journal of Political Economy, 21(1), 13-28.
