Role of mergers and acquisitions on corporate performance: emerging perspectives from Indian IT sector

Abstract

This article is an attempt to investigate the impact of mergers and acquisitions (M&As) on corporate performance of Indian IT sector for the period 2007–2015. The focus of this article is on Indian IT sector as it has been the growth engine of the economy and emerging as its most internationalised sector. This article has engaged, fixed and random effect panel data models to measure the impact of M&As on various financial variables with comparative analysis of domestic and cross border deals. The findings reveal that the M&As have significant positive impact on Return on Net worth and Revenue of IT companies in India when both domestic and cross-border regions were considered together. Whereas, Earnings Before Interest, Taxes, Depreciation and Amortisation experienced significant decline. Return on Capital Employed did not experience any significant impact due to M&As. When the impact of M&As was analysed separately for domestic and cross-border deals, it was obtained that the impacts are in different directions for domestic and cross-border deals in two out of four variables. The significant inference is that domestic deals per se are much better than the cross border deals.

Keywords:

• Mergers
• acquisitions
• International organisations
• IT Sector (Information and internet Services)
• computer software
• panel data models

JEL Classification:

• G 34
• F13
• L86
• C33

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Similarly, we can interpret the results of control variables in other equations. Since, our focus is on impact of M&As, we skip the discussions on the results of control variables for other parameters.

Additional information

Notes on contributors

Rabi Narayan Kar

Rabi Narayan Kar, Principal, SLC, University of Delhi, India.

Niti Bhasin

Niti Bhasin, Associate Professor, Department of Commerce, Delhi School of Economics, University of Delhi, India.

Amit Soni

Amit Soni, Assistant Professor, Department of Economics, Shaheed Bhagat Singh Evening College, University of Delhi, India.