Exploring the long-term trade-off between efficiency and value creation in horizontal M&As: Evidence from Nigeria

Abstract

The purpose of this paper is to investigate the voluntary horizontal M&A impact on operating performance in Nigeria between 1995 and 2012 under different complementary approaches. Residual income valuation (RIV), economic value-added (EVA), data envelopment analysis (DEA) and stochastic frontier analysis (SFA). Results showed a statistically significant improvement in the technical efficiency of both bidder and target companies, the reduced efficiency levels of the bidder firms under DEA scores reveals the specifics of the productive technology. This may suggest that resulting merged companies in Nigeria may have not even become too big in scale or even reached the most productive scale size, despite their almost monopolistic position in the sector. This happens because the scale size of the sector is small per se, implying that the investments necessary to achieve synergistic gains have to be partially covered by price increases. This study will guide both...