Effects of Mergers and Acquisitions (M&A) and joint ventures on long-term firm performance and idiosyncratic risk
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This dissertation is an empirical study of effects of mergers and acquisitions and joint ventures (MAJV) on the acquiring and participating firms’ long term ex-post performance and idiosyncratic risk. The research aims to extend the current knowledge on the acquirers’ and joint venture participants’ performance and risk. This objective not only reveals how the firms fare following the MAJV but also helps to understand the motives for corporate strategic decisions such as MAJV. The results show interindustrial variation in acquiring firms’ performance and idiosyncratic risk following the M&A. Acquirers from the food and pharmaceutical industries enjoy positive abnormal returns following M&A while acquirers from industries such as recreational products, entertainment, nonmetallic mining, construction, and real estate lose their wealth following the M&A. Acquiring firms, in general, enjoy lower idiosyncratic risk following the M&A compared to other firms in their industries that did not engage in M&A. The study of joint ventures reveal that firms that form joint ventures gain positive abnormal returns following the joint venture formation and their idiosyncratic risk is significantly lower than the firms that did not engage in joint ventures but are in the same industry. The results support the findings of previous literature which suggests that joint ventures create synergy.