Abstract:

Growth of firms, their improvement, efficiency and profitability are cardinal benefits expected from mergers and acquisitions (M&A). This research is an attempt to seek for the effects of mergers and acquisitions on the performance of firms in the Ghanaian Stock Market from 2002 to 2012. The study was accounting based and used univariate analysis with t-testing as well as panel data methodology for the analysis. The univariate analysis revealed dwindling profitability after the merger for all the firms with the t-test showing significant difference in profitability before and after merger. The evidence from panel methodology indicates that M&A has significant negative effect on the profitability of firms. It is therefore imperative that M&As are properly planned, executed and evaluated. Specifically, efforts should be made to attract and retain key personnel of the merged firms through performance contracts or bonuses, proper conflict resolution measures should be put in place and conscious effort made to reap the expected returns of the merger. This is because gains from mergers and acquisitions do not just occur. Additionally, our results indicate that risk and firm size have a considerable effect on profitability of firms while debt capital and firm growth enhance firm profitability.

KEYWORDS

Merger and Acquisition, Profitability, Ghana

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