Journal of Financial Services Research,Vol. 39, Issue 3, Pages: 119-144.
This paper examines the relationship between mergers & acquisitions (M & As), diversification and financial performance in the US property-liability insurance industry over the period 1989-2004. The risk-adjusted return on assets (ROA), return on equity (ROE), Z-score and total risk measured by earnings volatility are considered as a relevant indicator of performance. We find that acquirers’ financial performance decreases and earnings volatility increases during the gestation period after the M & As perhaps due to increased frictional …