The Postmerger Financial Performance of Hotel Companies

Li-Tzang Jane Hsu · SooCheong Shawn Jang

54 citations0/0 files storedJournal of Hospitality & Tourism Research

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Corporate Finance and Governance Financial Markets and Investment Strategies Financial Reporting and Valuation Research

Abstract

This study investigates the postmerger financial performance of acquiring firms in the lodging industry between 1985 and 2000. Jensen Measure Model and Market Model are used to examine long-term and short-term market measure of performance. Additionally, return on assets (ROA) and return on equity (ROE) are used to assess the accounting measures for the financial performance of acquiring firms. The results indicate that the shareholders of acquiring hotel companies earned no abnormal equity returns over the short term, which indicates no significant relationship between merger announcement and the change in short-term equity value. As opposed to general expectations, the study reveals that merger has a negative effect on the acquiring firms' equity values over the long term. Similarly, the ROA and ROE are found to become significantly lower after mergers. Overall, this study provides evidence that shareholders of acquiring hotel companies did not benefit from the mergers.

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References

1990Does Corporate Performance Improve After Mergers?1992The Post-Merger Performance of Acquiring Firms: A Re-Examination of an Anomaly 1983The gains to bidding firms from merger 1997Do Long‐Term Shareholders Benefit From Corporate Acquisitions?1983Merger bids, uncertainty, and stockholder returns 1997Do Long-Term Shareholders Benefit From Corporate Acquisitions?1980Merger proposals, management discretion and stockholder wealth 1989Strategic Adaptability and Firm Performance: A Market-Contingent Perspective

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