Abstract
We examine the financial performance of firms in the post-Merger and acquisition period for firms listed on the Karachi Stock Exchange by exploring various motives of merger and acquisitions offered by theoretical and empirical literature. Specifically, we explore these motives in the context of the theory of synergy, agency theory and behavioral finance perspectives. Empirical results for agency theory shows the presence of empire building motives that lead to the underperformance of firms in post-merger and acquisition period. The study finds no support for managerial risk aversion hypothesis of agency theory in Pakistani market. Empirical results do not find any evidence to support the presence of managerial hubris or overconfidence proposition but we do find evidence in support of the escalation of commitment hypotheses and its impact on post-merger and acquisition performance.
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