EVALUATING POST-MERGER PERFORMANCE OF GREEK FIRMS: A THEORETICAL FINANCIAL ACCOUNTING PERSPECTIVE

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1 International Journal of Entrepreneurship and Management Research Vol. 1 No. 1 (January-June 2011) pp EVALUATING POST-MERGER PERFORMANCE OF GREEK FIRMS: A THEORETICAL FINANCIAL ACCOUNTING PERSPECTIVE 1 Michail Pazarskis Adjunct Assistant Professor, Department of Accounting, Technological Educational Institute (T.E.I.) of Serres, Greece, pazarskis@gmail.com. 2 Alexandros Alexandrakis Associate Professor, Department of Accounting, Technological Educational Institute (T.E.I.) of Serres, Greece, alex@teiser.gr. Abstract: This study examines diachronically through empirical past studies the post-merger firm performance in Greece. There is an attempt to depicture the M&As effects on their post-merger performance within a theoretical financial accounting perspective in many aspects. Even though there is a scarcity of studies on this specific subject, the more important studies in the area of post-merger performance in Greece are evaluated and categorised in three thematically discrete areas of related past: accounting studies, event studies, and studies from empirical surveys of executives. As there is no similar past effort, the motivation of this study is to fill this gap in the existing literature and provide a useful framework for academics, researchers and business practitioners about Greek merger activity. The theoretical research results from the post-merger performance studies analysis indicate the existence of special peculiarities to the Greek firms post-merger performance. JEL Classification: G34, M40, M10 Keywords: Mergers, acquisitions, post-merger performance. 1. INTRODUCTION The strategy literature commonly argues that M&As are one of the mechanisms by which firms gain access to new resources and, via resource redeployment, increase revenues and reduce cost. The main

2 Michail Pazarskis & Alexandros Alexandrakis hypothesis in successful M&As activities is that potential economic benefits arising from them are changes that increase business performance that would not have been made in the absence of a change in control (Pazarskis, 2008). However, many researchers and business practitioners regard with scepticism this hypothesis, despite the fact that many others are confident and enthusiastic. Related to the above statement is a characteristic declaration for this contradiction from Dennis Mueller (1989) that, even two decades ago, it is still holds: No topic in industrial organization generates as much disagreement and controversy as mergers. Why do they occur? What are their economic and noneconomic consequences? What ought government policies toward mergers be? Each question has been given a variety of answers, some diametrically opposed to one another (Mueller, 1989, p. 1). In order to provide further theoretical evidence on this issue at Greek business and especially from a financial accounting perspective, this study examines diachronically through empirical past studies the post-merger firm performance in Greece and attempts to depicture the M&As effects on their post-merger performance in many aspects. The motivation of this study, as there is no similar past effort, is to fill this gap in the existing literature and provide a useful framework for managers, shareholders, academics, etc. The structure of the paper is as follows: the next section analyses the legal framework on mergers in Greece, the following section presents the post-merger performance evaluation methodologies in M&As with emphasis on a financial accounting perspective. The next one present the research analysis of this study (related past accounting studies, related past event studies, related past surveys of executives studies and interpretation of the combined results), and the last section concludes the paper. 2. LEGAL FRAMEWORK ON MERGERS IN GREECE According to several regulations published in the Government Gazette, the general legal framework on M&As activities is described 2

3 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... by the articles of the Law 2190/1920, which concern public companies, limited by shares (S.A.), and were amended by the Presidential Decree 498/1987. M&As activities that concern L.T.D. companies are directly regulated by the Law 3190/1955, and especially, according to the articles of this Law. This basic framework is postponed, into some specific areas on M&As, by the Law Decree 1297/1972, and the articles 1-5 of the Law 2166/1993 that are concerning fiscal incentives for the formation of larger companies by mergers. Furthermore, the article 16 of the Law 2515/ 1997 specifies and enhances the legal process for bank mergers, in accordance to the article 2 of the Law 2076/1992. Also, the Law 2515/ 1997 surrogates the articles 1-15 of the Law 2292/1953, and there are special provisions and incentives for the concentration of the Greek banking system. In accordance to the Law Decree 1297/1972, and the Law 2166/1993, the Law 2992/2002 provides new incentives for investments and it expands the categories of investments, including the form of international M&As (Pazarskis, 2008). The term of merger is perceived, in general, as the action of unity from two or more companies. In this study, the terms merger and mergers and acquisitions (M&As) are used in many cases at the text, providing similar meanings for the terms merger and acquisition, while in others, wherever it is necessary, there is a clear distinction among them and always exists a provision of the exact meaning. To make clear, the perception of each term, they are analysed separately below (Steiner, 1975; Mueller, 1989; Trautwein, 1990; Mantzaris, 2003; Pazarskis, 2008). The type of M&As activity, or how a company can make an M&A and under which exact way can an M&A activity be formed, is possible in three ways in Greece, as it is specified in the above laws: merger by absorption, where the acquiring firm retains its name and its identity, and it acquires all of the assets and liabilities of the acquired company; after the merger the acquired firm ceases to exist as a separate business entity, merger by consolidation, where an entirely new firm is created; both the acquiring firm and the acquired firm terminate their previous legal existence and become part of the new firm, 3

4 Michail Pazarskis & Alexandros Alexandrakis merger by acquisition, where one firm purchase another firm s stock for cash, or shares of stock, or other securities. Furthermore, according to the correlation of the activities of merged companies, the study makes a distinction for M&As activities of three types: horizontal merger, where a company takes over another from the same industry and at the same stage of the production process, vertical merger, where the target is in the same industry as the acquirer, but operating at a different stage of the production chain, either nearer the source of materials (backward integration) or nearer to the final customer (forward integration), conglomerate merger, where the acquiring firm and the acquired firm are apparently unrelated to each other (Gaughan, 1996, Weston et al., 1996; Pazarskis, 2008). 3. POST-MERGER PERFORMANCE EVALUATION METHODOLOGIES Several methodologies have been employed in order to reveal the post-merger performance of M&As-involved firms and evaluate the shareholders eventual profitability or not, with different research samples and within different time intervals (Bruner, 2002; Pazarskis, 2008). Concerning the number of M&As-involved examined firms, the post-merger performance methodologies, mainly within an accounting and financial perspective, are categorized in two main categories: (i) Case studies or clinical studies, that provide an in-depth analysis with many business details for a limited number of merger-involved firms (one to five firms) and do not lead to a general evaluation or conclusion of a particular phenomena in economy, as they are M&As (for sample studies on this category, see characteristically: Kaplan, 1989; Lys & Vincent, 1995; Ruback, 1982; etc.). (ii) Studies with extensive research sample, that analyzed a large number of involved firms in order to provide a general conclusion 4

5 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... on a particular research area (as M&As are). There are three subcategories in this category: (i) accounting studies, (ii) event studies, (iii) surveys of executives studies. Their characteristics are discussed below (Pazarskis, 2008): Accounting studies. This methodology evaluates the postmerger performance with the examination of financial statements, accounting ratios, etc., as performance and/or profitability indicators that are evaluated with a comparison of them before and after the M&As event in order to revealed changes in these examined performance measures. Usually, these measures are net profits, Return On Equity - ROE (ROE = net income/equity), Return On Assets - ROA (ROA = EBTDA/net assets), Earnings Per Share - EPS, etc. Event studies. In this case the research question is the evaluation of stock prices with and without the M&As transactions. In this methodology that evaluate the stock price reaction to merger events, there is a calculation of the stock price in real time and after the merger, and this is compared with the expected eventual stock prices without the M&As event that calculated with forecasting statistical analysis. These differences in numbers reveal positive or negative abnormal returns in stock prices for the shareholders and the research periods are posted some days before and after the M&As events. Surveys of executives. This methodology evaluates the postmerger performance with the examination of the opinions of the executive managers of firm in merger-involved activities. These managers with the help of a questionnaire or a special structured interview answer and analyse several strategic financial and nonfinancial characteristics of their firms and evaluate the firm performance over a personal opinion basis. In contrast to the first two above cases, this one presents more subjective characteristics than the others. Last, many studies for further detailed analysis employed more than one of the above methods of evaluation for better final result s accuracy (Kaplan, 1986; Bruner, 2002; Pazarskis, 2008). 5

6 Michail Pazarskis & Alexandros Alexandrakis Figure 1: Categorization of Post-Merger Performance Evaluation Methodologies 4. RESEARCH ANALYSIS In this section, the research analysis of this study is proceed with the evaluation of the more important studies in the area of postmerger performance in Greece, as there is a scarcity of studies in this specific subject, categorised in three discrete thematically areas: related past accounting studies, related past event studies, related past surveys of executives studies. Also, the last section presents an interpretation of these combined results. Related Past Accounting Studies Mylonidis and Kelnikola (2005) with their paper examined the postmerger performance of five merger bank deals in Greece, employing conventional pre- vs. post-merger accounting ratio comparisons and, for further analysis, the event study methodology. Post-merger performance results of their sample revealed that profit, operating efficiency and labour productivity ratios of the bidding and target banks did not improve after merger. But when these results compared with the corresponding ratios of non-merging banks (the control group), they concluded that merger activity had finally a positive impact on banks post-merger performance. Also, they found with the event study methodology that from the combined view of the target and bidding Greek banks, M&As were on average successful and created value on a net basis. All-in-all, Mylonidis and Kelnikola concluded that the emphasis on M&As, as an argument for the survival of Greek banks in the competitive European marketplace, was extremely convincing. 6

7 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... Pazarskis, Vogiatzoglou, Christodoulou and Drogalas (2006) have investigated empirically the impact of mergers and acquisitions on the operating performance of M&A-involved firms in Greece. Using financial and non-financial characteristics, the post-merger performance of fifty Greek companies, listed at the Athens Stock Exchange (ASE) that executed at least one merger or acquisition in the period from 1998 to 2002, was from them investigated. They introduced seven selected accounting variables (financial characteristics) in order to measure operating performance and compare pre- and post-m&a firm performance for three years before and after M&A, while the year of M&A event was omitted from their comparisons. Furthermore, the business strategy and the operating performance of the firms were evaluated on a set of explanatory variables (non-financial characteristics) from a confidential questionnaire response data, which include the type of merger, the method of evaluation and the method of payment. The main interesting finding of their survey was that there was strong evidence that the profitability of a firm that performed an M&A was decreased due to the merger/acquisition event. Pazarskis, Lyroudi and Christodoulou (2008) have evaluated with their study empirically the impact of mergers and acquisitions on the post-merger performance of merger-involved firms in Greece in the long-run perspective. They investigated using financial ratios the post-merger performance of a sample of listed Greek companies that executed at least one merger or acquisition as acquirers. For the purpose of the study, they employed an explanatory set of twenty -six financial ratios, which divided into five groups, in order to measure firms post-merger operating performance and to compare pre- and post-merger corporate performance for four years before and after the M&A announcements. The results revealed that six out of the twenty-six ratios had decreased (asset turnover ratio, owner s equity turnover ratio, ratio of owner s equity to total assets, earnings per share, dividend yield on equity capital, and book value per share). The only indicators that improved from the M&As event were the working capital and inventory conversion period ratio. The rest eighteen ratios, including all the examined ratios from the category profitability ratios, did not change significantly due to the M&A event. 7

8 Michail Pazarskis & Alexandros Alexandrakis Eleftheriadis, Pazarskis, Christodoulou and Drogalas (2008) with their paper examined empirically the impact of business risk on the post-merger operating performance of a sample of Greek firms that involved in M&As transactions as acquirers. Business risk in this study was perceived as a firm s exposure to uncertainty, which can lead to changes in the operating performance of this firm. Developing or changing a firm its operating activities from a particular industry to another industry could affect its operating performance. Thus, they sub-tracted the sample of firms in two different groups, which were: (i) firms that involved in M&As activities as acquirers with firms from their industry (horizontal or vertical mergers) and (ii) firms that involved in M&As activities as acquirers but with firms from a different industry and were exposed in extended business risk (conglomerate mergers). The financial ratios in their study were organised into five main groups: (i) liquidity ratios, (ii) activity ratios, (iii) profitability ratios, (iv) financial structure and viability ratios, and (v) investment ratios. The results revealed that conglomerate mergers were more successful than non-conglomerates concerning the category of liquidity ratios (in one variable) and the category of financial structure and viability ratios (in one variable). Also, concerning the categories of profitability ratios and investment ratios, there was no clear evidence if conglomerate mergers were more successful or not than non-conglomerates, as it was observed ambiguous results. Last, at the category of activity ratios, there was no relative change of any examined variable and that did not support partially neither conglomerate nor non-conglomerates mergers. From the above results, they concluded that the targets at conglomerate mergers were mainly firms that had high liquidity levels and with a lot of their funds in cash, or nearly in cash, and for this reason they observed this real improvement in the acquirer firm s liquidity even four years after the examined conglomerate merger. Pazarskis, Karagiorgos, Christodoulou and Eleftheriadis (2009) have analysed the impact of mergers and acquisitions on the economic performance of merger-involved firms in Greece. They investigated using accounting ratios the post-merger performance of a sample of forty Greek companies, listed on the Athens Stock 8

9 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... Exchange that executed at least one merger or acquisition in the period from 2003 to 2005 as acquirers. For the purpose of the study, they employ a set of four profitability ratios (ROE and ROA, before and after taxes, respectively), in order to measure firms economic performance and to compare pre- and post-merger economic performance for two years before and after the M&A announcements. Their results revealed that none of all the examined profitability ratios did not change significantly due to the M&A event and they concluded that M&As had not had any impact on economic performance of merger-involved firms and they were finally investment actions of zero value. Pazarskis (2009) investigated the success of merger decision in Greece during the last years through an extensive accounting study. The events of mergers and acquisitions that have been performed from merger-involved firms as acquirers listed on the Athens Stock Exchange were evaluated using accounting data (financial ratios) from a sample of five hundred sixty Greek M&As transactions. His final sample that was finally investigated consisted of over seven per cent of the above first sample, which has been reduced for some special limitations. He employed an explanatory set of seven ratios to measure firms post-merger performance and to compare preand post-merger performance for two years (or one year) before and after the M&A announcements and within different time intervals. His results concerning a two-year-period after M&As revealed that that mergers had a relative impact on the post-merger operating performance of the acquiring firms, as three out of the seven accounting ratios had increased and changed significantly due to the M&A event, while one ratio had decreased, and thus his research provided final ambiguous results. Also, as M&As have had a particular impact on different ratios diachronically he confirmed with his conclusions the phrase that an acquired firm is a going-concern for an acquiring firm and presents special and different difficulties for the reach of a really successful operating performance after their unity. Finally, concerning the analysis of the same M&As events in different time intervals, his study concluded that the exact time of merger actions have influenced with a different relative change the post-merger operating performance of Greek acquiring firms. 9

10 Michail Pazarskis & Alexandros Alexandrakis Related Past Event Studies Hatzigayos, Lyroudi and Subeniotis (2000) have investigated the legal framework of M&As in the Greek banking sector. They have studied the formal procedure, the shareholders protection, the creditors protection, present taxation alignments, as well as the practical framework of M&As in the Greek banking sector. Furthermore, they investigated the market s reaction to the announcement of a merger or an acquisition by a bank listed in the Athens Stock Exchange, during the period (from May 1998 to August 1999). Their methodology was the typical event study methodology. The results indicated an insignificant negative market reaction for their whole research portfolio. Lyroudi, Subeniotis and Hatzigayos (2001) examined the effects of M&As announcements on the shareholders wealth of the acquiring companies listed in the A.S.E., during the period (from May 1998 to August 1999). The methodology was the typical event study methodology. The sample of the bidding firms included Greek companies, and the target s location was Greece or, in some cases, other countries of the Balkans. They observed that there was a non-significant negative market reaction for the acquiring companies. They claimed that a possible explanation of this result could be found at the asymmetric information between insiders and outsiders, agency problems between the acquiring companies management and its shareholders, or the high cost of the acquisition due to bidding wars among the potential acquirers. Also, they argued that another possible explanation could be the inefficiency of the legal framework that existed till 1999 and was postponed by the Regulatory Decision 19 of the Board of Directors of the ASE, in accordance to the Law for Obligations of listed companies in cases of mergers, takeovers, change of principal/main activity, or spin-off of a sector (Gov. Gaz. 40 B/ ).Although, there is evidence of such phenomena, it is true that the date of the introduction of the Law ( ) was during the time frame of the survey (from May 1998 to August 1999). From this clue, there is some evidence that the results of this study may need to be reconsidered from a different point of view. 10

11 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... Lyroudi, Subeniotis and Hatzigayos (2002) examined the effects of M&As announcements on the acquiring company s stock price during the period (from January 1998 to December 2000). The methodology was the typical event study methodology. The sample of the bidding firms included only Greek companies, and the target s location was mainly Greece. They found that there was a significant negative market reaction for the acquiring companies during the whole period, to a merger and an acquisition announcement, in contrast to the expected formal result. They proposed that a possible explanation of this result could be the asymmetric information between insiders and outsiders, agency problems, or the large cost of the acquisition due to rival potential acquirers. Protopapas, Travlos and Tsagarakis (2003) have investigated the stock price reaction to mergers and acquisitions on the announcement day by Greek firms listed in the Athens Stock Exchange (ASE). They analysed post-merger stock firm performance that participated in mergers and acquisitions as buyers or targets during the period using an event study methodology. With their findings claimed that the examined Greek M&As were associated with statistically significant abnormal returns for both the acquiring and target firms. Thus, they concluded that mergers and acquisitions in Greece for their research period have created wealth shared by both parties involved in this corporate restructuring. Manasakis (2004) in his study evaluated the profitability from M&As of the Greek banking sector at the period from 1995 to 2001, considering their abnormal returns from some of their announcements for all this sector s firms. He performed the research evaluation of these abnormal returns applying the typical event study methodology. His sample consists from the majority of M&As transactions that included at least one listed in the Athens Stock Exchange banking firm, merged or acquired, in the above referred period. The author argued that the cumulative abnormal returns for the shareholders of the merged or acquired banks were greater than those of the shareholders of the acquiring firms. Furthermore, Manasakis claimed that, in the case of two listed banking firms, their abnormal returns were statistically significant than this of the only one listed banking firm. Last, he reported that in the special case of 11

12 Michail Pazarskis & Alexandros Alexandrakis a conglomerate M&A was existed a better market reaction than at the other ones (horizontal or vertical merger). Koulakiotis, Papasyriopoulos and Dasilas (2006) with their study followed and extended the approach of Ko, Lee and Yun (1997) in order to examine the effects that announcements of acquisitions by financial firms of the Athens Stock Exchange had on their stock prices and their abnormal return volatility from 1998 to Apart from the traditional event study methodology used to examine how the announcement of acquisitions affected the value of seven Greek financial firms listed on the ASE, they have also analysed the relationship between announcement of acquisitions and abnormal return volatility using three models: the GARCH, the E-GARCH and the GJR-GARCH model in a simple form. The empirical results indicated that for bidders the announcement of acquisitions show positive but statistically insignificant average abnormal return (AAR) during the event period. This result was consistent with the majority of US studies that have found insignificant market reaction around the announcement of bank M&As for bidders. In addition, an abnormal return pattern revealed no significant movements around the announcement day. Last, the valuation effects of the three models with the simple method indicated an insignificant impact on the average abnormal return volatility at the 5% level of significance. Spyrou and Siougle (2007) investigated with their study whether M&As have created value for shareholders of all listed non-financial firms in the Athens Stock Exchange, during an extremely volatile period, between January 1997 and January 2004, which includes the top rise and the top falling of stock prices in the ASE. The authors claimed that with their received results have indicated statistically insignificant abnormal returns around merger announcements for target firms while for bidder firms the reaction is not uniform, in contrary to earlier empirical evidence of existed literature on developed capital markets, and they argued that the market perceived that value creation in different sense between the diverse sectors in the Greek economy. Last, Spyrou and Siougle concluded that there was evidence that information arrived at the stock market a few days before the official announcement and, in contrary to 12

13 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... earlier empirical evidence, they have reported insignificant returns for target firms. Kyriazis and Diacogiannis (2008) with their study analysed the determinants of the short-term excess stock returns of a sample of Greek merging firms during the period that consisted a final sample of 100 completed domestic bids, of which 46 concerned listed targets and 54 unlisted ones. These determinants were the mode of payment, the pre-bid acquirer s stake in target firm, and the target s status, and their sample included only friendly bids. They have estimated excess stock returns using the market index model within the standard event studies methodology framework. Their result showed that acquirers gain on average a 4-5% positive and significant excess returns which are higher than the insignificant and close to zero returns observed in the US and UK studies, and their results were consistent to those reported in the previous study of Protopapas, Travlos and Tsagarakis (2003) for the Greek acquirer market. Also, they argued that pure cash offers as compared to the pure stock offers have produced the largest gains for both the acquiring and acquired firms shareholders, as referred as well at the international empirical evidence. Last, Kyriazis and Diacogiannis found that bidders gain more by acquiring listed as compared to unlisted targets and that bidders experience highly negative excess returns when they use stock to acquire unlisted targets. Related Past Surveys of Executives Studies Campbell (1990) have studied acquisitions of Greek firms, and found that there are six basic reasons for the takeovers that have taken place in Greece: (i) lack of modern technology, (ii) lack of adequate investment funds, ( iii) enhanced competitive future position, ( iv) problematic economic situation of several firms, ( v) inefficient management, and (vi) tempting economic offer from the acquiring firm. Furthermore, Campbell (1990) argued that the motives of the acquiring firms at their target companies were the following: expansion of activities; potential for developing new markets; enlargement of product mix; existing distribution network; exploitation of a successful brand name; and approach of the European Community Market through Greece. Although, this study has been 13

14 Michail Pazarskis & Alexandros Alexandrakis carried more than fifteen years ago, its conclusions and remarks have remained actual and still holds till now. Travlos (1993) have claimed that up to 1990, there was no legal framework to protect and regulate the market for corporate control in Greece. The stock market environment was composed of less than 200 firms, priority of public sector or of some Greek families, there were low levels of stock activities, and the European Union Market, including Greece, continued to evolve. As companies were trying to position themselves in this new era, Travlos (1993) found that from 1986 to 1990, there were 64 mergers; the acquirers were 43 foreign firms and 21 domestic ones. The majority of the target firms have performed horizontal mergers and vertical mergers. It is obvious and well known that such transactions take place in the first phase of an M&As long-term process and exhibits the companies intention for efficiency in the production, distribution and financing process. Agorastos and Pazarskis (2003) examined empirically the behavior, the attitude and the degree of activity in mergers and acquisitions of Greek businesses listed in the ASE In a five-year-time period, from 1998 to 2002, the results for the Greek companies indicated that the most popular way of merging in Greece was merger by absorption (60%), and in case of merger by acquisition, the acquisition of stock was the most preferable (76%). Also, the most popular method of payment was cash payment (45%), and the most popular method for a company valuation was the discounted cash flow approach. As they examined the timing of M&As activities in Greece, it was quite surprising, and to some extent a paradox, that they found that the highest number of M&As during these five years had happened not in 1998, that was the peak of stock activities (in the period 1998 to 2002), but during 2002, when the falling of stock prices (2002) in the ASE was expected to reverse and slow down any M&A activity. Furthermore, Agorastos and Pazarskis observed that the profile of the most preferred target company was an S.A. company (85% of the sample companies), especially not listed in the ASE. Almost half of the sample companies (49%) were involved in a horizontal merger, and 77% of the M&As in their sample concerned a domestic company as their target. 14

15 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... Lazaridis (2003) examined empirically with the use of a questionnaire Greek M&As activities of sixteen banks in Greece in the period through the answers of their employees. The research results received from 400 executive bank employees in the period from November 2002 to February The author concluded that 20.16% of the executives considered that its firm profitability performance had enough improved after M&As event; 37.5% answered that slightly improved, while 32.26% only a few, and the rest of the sample answers (26.7%) did not want to express their opinion Zarotiadis and Pazarskis (2003) have tried to force the characteristics and to estimate the degree of M&As activities that Greek enterprises had in South-Eastern European countries. In their empirical survey, they examined the activities of all the companies listed in the main market of the ASE, in three countries that received the most Greek international investments till then, namely, Bulgaria, Romania, and Albania. They found that 62 companies listed in the main market of the A.S.E. had investments in these selected countries with different ways, whereby 34% of those were M&As, and almost all of the questioned companies (95%) performed a merger by acquisition. This indicated to some extent either an absence of previous business activities in the host country, or an absence of a subsidiary in these countries. Furthermore, it could mean that the companies were trying to find a way to gain a quick access in these marketplaces. Zarotiadis and Pazarskis also found that the majority of the sample firms (89%) proceeded to the acquisition with cash payment. Based on the above, it can be inferred that the target companies have been of relative small size and that the probable intention of Greek stockholders was to keep full control of management in their new extended firm. Furthermore, the authors concluded that the main reason of the sample firms (72%) for this specific M&As activity was to acquire a new company and to cover only pure domestic demand, without any importing or exporting activities. The authors argued that M&As activities of the Greek firms in Bulgaria, Romania and Albania were analogous to the Greek exporting activities in the same countries. Lazaridis, Noulas and Papanastasiou (2004) examined employees opinion about M&As of their company, regarding the 15

16 Michail Pazarskis & Alexandros Alexandrakis success of this event with the comments made by the employees, in an empirical survey that took place during the spring of 2003 among businesses acquired in Greece. They argued that an M&A event specifically would be said significant if employees attitude (behaviour) did not remain unchanged before and after that. This means that M&As that altered the working environment either positively or negatively thus affecting the workers opinion about several issues. Furthermore using the x 2 -test they check for the significance of M&As transactions. Their empirical results showed no significant change in the attitude of the employees and this, according to Lazaridis, Noulas and Papanastasiou, raise many questions concerning the success of the M&As in Greece and the exact circumstances or criteria under which the M&As actions have taken place. Soubeniotis, Mylonakis, Fotiadis, Chatzithomas and Mertzimekis (2006) examined with their study the appearance of mergers and acquisitions in Greece during the period at companies listed in the main market of the ASE. They used the questionnaire of Lazaridis (2003) in order to investigate: strategic targeting of M&As, financial method of target s evaluation, factors affecting the business matching of involved companies after M&As, evaluation of successful or not of the M&As transactions considering executives view. Despite the low rate of the received answers (a sample consisted of 22 firms), their results revealed that 33.3% of the executives considered that its firm profitability performance had enough improved after M&As event; 13.3% answered that slightly improved; and 26.7% only a few, while the rest of the sample answers (26.7%) did not want to express their opinion. Last, their results were not exactly similar to those reported in the previous study of Lazaridis (2003) for the Greek M&As. Interpretation of the Combined Results Concerning the related past accounting studies on post-merger performance and as there are contradicting research results from the above examined studies, it is concluded that M&As had a different particular impact on accounting ratios over the examined firm data sets and time intervals, as some accounting ratios had 16

17 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... increased and changed significantly due to the M&A event, while other ratios had decreased, or did not change at all. Also, this research reveals concerning this category of postmerger performance event studies, that the majority of event studies reported a positive impact (significant or not) on the shareholders wealth at many cases (acquiring and acquired firms shareholders), even though there was as well some negative ones or some with no change. Furthermore, about the received theoretical results from past surveys of executives studies on post-merger performance, M&As involved managers with the questionnaire answers and their analysis have enlightened several strategic non-financial characteristics and evaluate their firm performance over a personal opinion basis. The final conclusions about post-merger performance and its different relative change were at some cases positive and, about the future, optimistic, while at others, less enthusiastic, or even negative one, concerning the M&As activities of their acquiring firms. All-in-all, from the diachronically analysis of over twenty from the most important Greek studies on this special subject, it is observed final ambiguous results and it is confirmed once again the phrase that an acquired firm is a going-concern for an acquiring firm, and which presents special and different difficulties for the reach of a really successful post-merger performance after their unity. 5. SUMMARY AND CONCLUSIONS One of the main elements of contemporary corporate restructuring, with a universal acceptance, is the formation of new business entities via mergers and acquisitions (M&As). Through empirical past studies, this study examines diachronically the post-merger firm performance in Greece. There is an attempt to depicture the M&As effects on their post-merger performance from several past studies through an analytical literature review within a theoretical financial accounting perspective and in many aspects. Even though there is a scarcity of studies on this specific subject, the more important studies in the area of post-merger performance in Greece are evaluated and categorised in three thematically discrete areas of related past: 17

18 Michail Pazarskis & Alexandros Alexandrakis accounting studies, event studies, and studies from empirical surveys of executives. The theoretical research results from the post-merger performance studies analysis indicate the existence of special peculiarities to the underlying Greek firms post-merger performance. More specifically, concerning the related past accounting studies on postmerger performance there are contradicting research results from the above examined studies. Also, regarding the category of postmerger performance event studies, the majority of event studies reported a positive impact (significant or not) on the shareholders wealth at many cases (acquiring and acquired firms shareholders), even though there was as well some negative ones or some with no change. Furthermore, about the received theoretical results from past surveys of executives studies on post-merger performance, the final conclusions about post-merger performance and its different relative change were at some cases positive and, about the future, optimistic, while at others, less enthusiastic, or even negative one, concerning the M&As activities of the acquiring firms. To sum up, from the diachronically analysis of over twenty from the most important Greek studies on this special subject, there are final ambiguous results. Last, future extensions of this study could examine theoretically the post-merger performance of Greek firms with even more, if possible, financial accounting studies and try to evaluate Greek M&As transactions with larger samples and within others or extended time frame periods. REFERENCES Agorastos, K. and Pazarskis, M. (2003), Mergers and Acquisitions in Greece, An Empirical Study, 3rd International Conference New Horizons in Industry and Education, August 28-29, 2003, Santorini, Greece, Conference Proceedings, pp Bruner, R. (2002), Does M&A Pay? A Survey of Evidence for the Decision-Maker, Journal of Applied Finance, 12, pp Campbell, B. (1990), The Corporate Acquisition in Greece: A Historical Review, Proceedings of the Congress on Mergers and Acquisitions, Greece, Conference Proceedings. 18

19 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... Eleftheriadis, É., Pazarskis, M., Christodoulou, P. and Drogalas, G. (2008), Operating Performance, Business Risk and Corporate Mergers: Some Greek Evidence, 2008 International Conference of ASECU ( Association of Economic Universities of South and East Europe and Black Sea Region), May 22-24, 2008, Bucharest, Romania, Conference Proceedings. Gaughan, A. (1996), Mergers, Acquisitions, and Corporate Restructurings, John Wiley & Sons, Toronto, Canada. Hatzigayos, T., Lyroudi, K. and Subeniotis, D. (2000), The Legal Innovations and the Practical Experience of Mergers in the Greek Banking System, International Conference Financial Stabilization and Economic Growth, October 26-27, 2000, Svishtov, Bulgaria, Conference Proceedings. Kaplan, S. (1986), The Role for Empirical Research in Management Accounting, Accounting, Organizations and Society, 11, pp Kaplan, S. (1989), Campeau s Acquisition of Federated: Value Destroyed or Value Added, Journal of Financial Economics, 25, pp Ko, K., Lee, I. and Yun, K. (1997), Foreign Listings, Firm Value, and Volatility: The Case of Japanese Firms Listings on the US Stock Markets, Japan and the World Economy, 9, pp Koulakiotis, A., Papasyriopoulos, N. and Dasilas, A. (2006), Acquisition Announcements, Firm Value and Volatility: The Case of Greek Financial Firms, International Bulletin of Business Administration, Issue 1, pp Kyriazis, D. and Diacogiannis, G. (2008), The Determinants of Wealth Gains in Greek Takeover Bids, International Research Journal of Finance and Economics, Issue 22, pp Lazaridis I., Noulas, A. and Papanastasiou, J. (2004), Results of Mergers and Acquisitions of Greek Businesses, Business & Economics Society International 2004 Conference, July 19-22, 2004, Rhodes Island, Greece, Conference Proceedings. Lazaridis, I. (2003), Impact of Mergers and Acquisitions of Banks in Greece: Empirical Research Findings, Journal of Financial Management and Analysis, 16, pp Lyroudi, K., Subeniotis, D. and Hatzigayos, T. (2001), Market Reaction of Bank Mergers and Acquisitions in the Athens Stock Exchange, 8th Annual Conference of the Multinational Finance Society, June 23-27, 2001, Lake de Garda, Étaly. Lyroudi, K., Subeniotis, D. and Hatzigayos, T. (2002), Mergers and Acquisitions in the ASE and Legal Aspects, 2002 Annual Conference of the Academy of Financial Services, October 8-9, 2002, San Antonio, Texas, USA, Conference Proceedings. Lys, T. and Vincent, L. (1995), An Analysis of Value Destruction in AT&T s Acquisition of NCR, Journal of Financial Economics, 39, pp

20 Michail Pazarskis & Alexandros Alexandrakis Manasakis, K. (2004), Evaluation of Abnormal Returns in the Bank Mergers and Acquisitions: the Case of Greece, 3 rd Hellenic Finance and Accounting Association (HFAA) Conference, December 3-4, 2004, Athens, Greece, available on-line at: Mantzaris, I. (2003) Management of Firms and Organizations (in Greek), B. Giourdas Editions, Athens, Greece. Mueller, D. (1977), The Effects of Conglomerate Mergers - A Survey of the Empirical Evidence, Journal of Banking and Finance, 1, pp Mueller, D. (1989), Mergers, Causes, Effects and Policies, International Journal of Industrial Organization, 7, pp Mylonidis, N. and Kelnikola, I. (2005), Merging Activity in the Greek Banking System: A Financial Accounting Perspective, South Eastern Europe Journal of Economics, 1, pp Pazarskis, M., Vogiatzoglou, M., Christodoulou, P., and Drogalas, G. (2006), Exploring the Improvement of Corporate Performance after Mergers the Case of Greece, International Research Journal of Finance and Economics, Issue 6, 1, pp Pazarskis, M., Lyroudi, K. and Christodoulou, P. (2008), An Examination of the Long Run Performance of Greek Acquiring Firms, 15 th Global Finance Conference (GFC 2008) on Global Capital Markets and Risk Management, Global Finance Association, May 18-20, 2008, Hangzhou, China. Pazarskis, M. (2008), Exploration of Mergers and Acquisitions of Greek Firms with the Application of Statistical Methods (in Greek), Ph.D. Thesis, Dept. of Business Administration, University of Macedonia, Thessaloniki, Greece. Pazarskis, M., Karagiorgos, T., Christodoulou, P. and Eleftheriadis, É. (2009), The Impact of Mergers and Acquisitions on Economic Performance of Greek Firms: an Accounting Perspective, 2 nd International Conference on Quantitative and Qualitative Methodological Models on Economy and Management, May 25-27, 2009, Athens, Greece, Conference Proceedings, pp Pazarskis, M. (2009), The Success of Merger Decision in Greece: A Contemporary Accounting Study, International Journal of Management Research and Technology, Issue 2, 3, pp Protopapas, P., Travlos, N. and Tsagarakis, N. (2003), Mergers and Acquisitions in Greece: Stock Price Reaction of Acquiring and Target Firms, Spoudai, 53, (4), pp Ruback, R. (1983) The Cities Service Takeover: A Case Study, Journal of Finance, 38, pp Soubeniotis, D., Mylonakis, J., Fotiadis, T., Chatzithomas, L. and Mertzimekis, C. (2006), Evaluation of Mergers & Acquisitions in Greece, International Research Journal of Finance and Economics, 1, pp

21 Evaluating Post-Merger Performance of Greek Firms: A Theoretical Financial... Spyrou, S. and Siougle, G. (2007), Mergers and Acquisitions of Non-Financial Firms in Europe: the Case of the Athens Stock Exchange, Applied Economics Letters, 14, pp Steiner, P. (1975), Mergers: Motives, Effects, Policies, University of Michigan Press, Ann Arbor, Michigan, US. Trautwein, F. (1990), Merger Motives and Mergers Prescriptions, Strategic Management Journal, 11, pp Travlos, N. (1993), Mergers and Acquisitions, Economic Bulletin, Commercial Bank of Greece, April-June 1993, pp Weston, J., Kwang S. and Susan E. (1996), Mergers, Restructuring and Corporate Control, 1 st Edition, Prentice Hall, New Jersey, US. Zarotiadis, G. and Pazarskis, M. (2003), International Mergers and Acquisitions of Greek Business in South-Eastern European Countries, An Empirical Study, 2003 International Conference of ASECU (Association of Economic Universities of South and East Europe and Black Sea Region), November 6-9, 2003, Beograd, Serbia and Montenegro, Conference Proceedings, pp

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