M&A Performance Analysis from Internal Capital Market

Abstract

M&A effect on performance has been analyzed mainly on the stock return perspective or static financial basis of company size and industry. This paper focuses on the internal capital market efficiency, employed to evaluate diversified companies, and clarifies M&A effect on financial performance from the dynamic basis. Through the analysis on internal capital and financial performance change aroused by M&A we have found that financial performance declines as internal capital market efficiency declines on M&A. We have also found internal capital market efficiency declines as diversification extent increases. Moreover we have found M&A increases diversification extent, decreases internal capital market efficiency, and declines financial performance.