Performance Measurement in Corporate Governance: Do Mergers Improve Managerial Performance in the Post-Merger Period?

Abstract

"Inspired by the Coase (1937) theory of the firm, we analyze the performance of Healy, Palepu, and Ruback (1992) sample of merged firms over a ten-year period using a managerially controlled efficiency measure, data envelopment analysis (DEA). Our individual, firm-level, year-by-year analyses indicate that the managerial performance of the merged firms generally improved in the post merger period as documented in the extant studies of mergers and acquisitions. However, there were also significant number of cases where we could not observe the improved managerial efficiency using this disaggregated approach. We conclude that the DEA based disaggregated approaches are useful tools in the hands of corporate governance boards with an interest in yearly or even quarterly managerial performance at the individual firm level."