ABSTRACT
This is an edited excerpt from the accounting study of post-merger performance in Chapter 3 of Meeks’ (1977) book, Disappointing Marriage: A Study of the Gains from Merger. The book is long out of print, and the detailed results are long out of date, but the study may be useful to readers new to this literature in spelling out in simple terms two challenges facing anyone using accounting data to assess the impact of M&A on financial performance: how to allow for influences on performance apart from M&A and how to allow for changes in the performance measure that arise from asset revaluations at the time of M&A. It also discusses the perennial problem of outlying observations; a measurement quirk in accounting profit rates in the year of merger; the inferences that can be drawn for operating efficiency when M&A has increased the participants’ market power; and how well the sample is representative of the population. The main changes to the original are to replace terms that have been superseded in later literature and to edit out some discussion peripheral to the theme of the present book. A postscript signposts later contributions to this strand of the literature.
