Measuring the Performance of Corporate Acquisitions: An Empirical Comparison of Alternative Metrics*
| Published date | 01 December 2006 |
| Date | 01 December 2006 |
| Author | Richard Schoenberg |
| DOI | http://doi.org/10.1111/j.1467-8551.2006.00488.x |
RESEARCH NOTE
Measuring the Performance of Corporate
Acquisitions: An Empirical Comparison of
Alternative Metrics
*
Richard Schoenberg
Cranfield School of Management, Cranfield University, Bedford, MK43 0AL, UK
Email: richard.schoenberg@cranfield.ac.uk
The choice of performance measure has long been a difficult issue facing researchers.
This article investigates the comparability of four common measures of acquisition
performance: cumulative abnormal returns, managers’ assessments, divestment data
and expert informants’ assessments. Independently each of these measures indicated a
mean acquisition success rate of between 44–56%, within a sample of British cross-
border acquisitions. However, with the exception of a positive relationship between
managers’ and expert informants’ subjective assessments, no significant correlation was
found between the performance data generated by the alternative metrics. In particular,
ex-ante capital market reactions to an acquisition announcement exhibited little
relation to corporate managers’ ex-post assessment. This is seen to reflect the
information asymmetry that can exist between investors and company management,
particularly regarding implementation aspects. Overall, the results suggest that future
acquisitions studies should consider employing multiple performance measures in order
to gain a holistic view of outcome, while in the longer term, opportunities remain to
identify and refine improved metrics.
Introduction
The choice of performance measure has long
been a difficult issue facing researchers within the
organizational field (Dess and Robinson, 1984;
Glaister and Buckley, 1998; Kirchhoff, 1977).
Finance and associated disciplines have relied on
objective performance metrics such as share-price
movements and accounting data to assess the
outcome of organizational choices. Others, for
example organizational behaviour and strategic
management, have frequently relied on subjective
performance indicators, including managers’ self
reports. In some instances the use of a subjective
measure has been justified by difficulties in obta-
ining objective data, for example because the
focal unit was a constituent part of a larger orga-
nization (Dess and Robinson, 1984).
The selection of appropriate performance
metrics is of particular relevance in inter-disci-
plinary fields such as mergers and acquisitions,
where diverse origins have led to theadoption of a
broad range of performance measures within
contemporary research (Cartwright and Schoen-
berg, 2006; Larsson and Finkelstein, 1999). This is
especially notable within studies that have in-
vestigated the antecedents of acquisition outcome
*
The article has benefited from the constructive com-
ments of the Editor, Gerard Hodgkinson, and two
anonymous reviewers. The author would also like to
thank Nardine Collier for her excellent research
assistance during the revision of the article, and Noriah
Abidin, Fiona Chow and Shahid Kazi for their
contributions to the data collection. Earlier versions of
aspects of the work were presented at the 2004 British
Academy of Management Conference, St Andrews and
the 2005 Academy of International Business Conference,
Quebec.
British Journal of Management, Vol. 17, 361–370 (2006)
DOI: 10.1111/j.1467-8551.2006.00488.x
r2006 British Academy of Management
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