Operating Performance Following Acquisitions: Evidence from Taiwan's IT Industry†

This paper examines the performance of Taiwanese firms following acquisitions and finds that, when contrasted with the acquisitions that take place in the U.S., Taiwanese acquirers exhibit negative industry-adjusted accounting performance. The negative performance is mostly driven by firms with low growth opportunities, but is mitigated under more concentrated shareholdings and better board structures. These findings suggest that while weak corporate governance at the country-level may adversely affect the overall effectiveness of the takeover market in Taiwan, there is substantial cross-sectional variation in corporate governance at the firm-level. The evidence also shows that the announcement of an acquisition is accompanied by a positive announcement effect, and the poor operating performance might be related to the decreased assets turnover and sales growth rate.