Absorptive capacity and post-M&A performance: exploring role of absorptive capacity in post-deal firm profitability

Abstract

Declining post-M&A firm performance remains a popular topic of research. In a sample of 12581 European acquiring firms from 2007 to 2014 empirical analysis shows the effect of absorptive capacity on post-deal profitability. The results show a positive effect for absorptive capacity on post-deal profitability. For firms with lower degree of absorptive capacity a significant benefit is found. Absorptive capacity shows diminishing marginal return on post-deal profitability. Moreover, method of payment affects the moderating role of absorptive capacity in post-deal performance. The moderating role of absorptive capacity in cross-border M&A shows ambiguous results for the employed profitability indicators.