Browsing by Author "Mohamed, Ali Nasser"

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    The Impact of Merger and Acquisition on Financial Performance: Evidence From the Non-Banking Financial Sector of Egypt
    (October University for Modern Sciences and Arts, 2024) Abdelmoaty, Abdelrahman Waleed; Mohamed, Ali Nasser
    Abstract This study investigates the impact of merger and acquisition (M&A) on financial performance (FP) in the long term and the short term by investigating the M&A effects on profitability, liquidity, and leverage in the long term, and the short term by examining the market reactions to the M&A news through investigating the abnormal returns on the acquiring firms’ shares. The sample in this study consists of 19 M&A transactions that have been executed by non-banking financial firms and occurred between 2013 and 2021. A paired T-test is used to compare 2 years of pre- and post-M&A for the acquiring firm to investigate the impact on profitability, which is measured by net profit margin (NPM), return on assets (ROA), and return on equity (ROE). Liquidity is measured by the current ratio (CR) and cash-asset ratio (CAR). Leverage is measured by debt-to-asset ratio (DOA), and debt-to-equity ratio (DOE). For the short term, average abnormal returns (AARs), and cumulative average abnormal returns (CAARs) are used to investigate the market reaction to the merger news. The findings of this study indicated that the Debt-to-asset ratio increased significantly as well as the cash ratio, indicating that the firms were able to improve their creditworthiness and benefit from the lower cost of capital acquired through debt in addition to benefiting from the lower taxes generated from the financial synergy those firms gained. Moreover, horizontal M&As increased the DOA and NPM of the acquiring firms, while conglomerate M&As did not result in any improvements. On the other hand, the short-term data analysis revealed that the market reacted positively to the M&A announcements the acquiring company’s shareholders were significantly impacted by the merger and acquisition announcement and the shareholders of the acquiring companies had positive cumulative average abnormal returns on the event window. The findings of this study support the diversification theory due to the decreased risk and increased debt capacity that resulted from diversification. Moreover, the findings support the efficiency theory since the firms became more efficient through revenue and cost synergy which was gained from the M&A. Furthermore, the findings contradict the agency theory, as both, the principals, and the agents benefited from M&A and there was no conflict of interest between them.