Impact of Corporate Governance Index on Post-M & A Performance of Indian Acquiring Companies

Abstract

The present study attempts to investigate whether differences in the quality of firm level corporate governance influence post-M&A performance of acquiring firms for a sample of companies by creating a corporate governance index. The study is based on a survey of sample of 155 companies having completed mergers and acquisitions deals announced during January 2003 to December 2008.

We use a broad, multifactor corporate governance score, which is based on the responses to objective survey questions supplemented with interviews of senior management, directors, CFOs, board members, company secretaries, compliance officers, and investor relation officers. The questionnaire is designed on the basis of major standard qualities relevant to measure the corporate governance. Companies having higher corporate governance score show better financial performance on the basis of all measures of rate of return. Companies with higher corporate governance score show better valuations. Companies with higher rank of corporate governance index are good performers which are revealed from better profitability ratios.