Merger In The Philippines: Evidence In The Corporate Performance Of William, Gothong, And Aboitiz (WG&A) Shipping Companies

Abstract

This paper examines the corporate (financial and operating) performance of WG&A, following the merger event from the economic-finance perspective. There are three periods of analysis: (1) three years prior to merger, (2) three years immediately after merger for the short-run analysis, and (7) seven years after the merger for the long-run analysis. The period of empirical analysis covered from 1994 to 2003. This paper applies the conventional accounting and financial approaches in analyzing the effects of merger in the corporate performance of the shipping companies. We tested the major hypothesis whether there have been significant improvements in the corporate performance of WG&A following the merger event, using a parametric statistical ttest. Merger theories predict that M&As may increase or reduce profitability as well as efficiency. Empirical results showed that pre-and post-merger values obtained mixed results. Some measures of corporate performance such as acid test ratio, total asset turnover, and net revenues suggest statistically significant gains in the long-run analysis, following M&A. Other performance variables such as net income, return on asset (ROA), return on sales (ROS), return on equity (ROE), net profit margin, capital expenditure, capital expenditure/sales (CESA), and capital expenditure/total asset (CETA) did not show significant gains after merger in the short run analysis. Mixed results verified in this study contribute significantly to the empirical literature on merger and acquisition in the shipping industry. Thus, merger in the Philippine shipping industry does not lead to all improved corporate performance both in short-run and long- run period as evident in this paper.