Abstract
This study investigates the postmerger financial performance of acquiring firms in the lodging industry between 1985 and 2000. Jensen Measure Model and Market Model are used to examine long-term and short-term market measure of performance. Additionally, return on assets (ROA) and return on equity (ROE) are used to assess the accounting measures for the financial performance of acquiring firms. The results indicate that the shareholders of acquiring hotel companies earned no abnormal equity returns over the short term, which indicates no significant relationship between merger announcement and the change in short-term equity value. As opposed to general expectations, the study reveals that merger has a negative effect on the acquiring firms' equity values over the long term. Similarly, the ROA and ROE are found to become significantly lower after mergers. Overall, this study provides evidence that shareholders of acquiring hotel companies did not benefit from the mergers.
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