IMPACT OF MERGERS AND ACQUISITIONS ON COMPANY FINANCIAL PERFORMANCE IN MALAWI

Abstract

The study assesses the impact of mergers and acquisitions on company financial performance in Malawi, using panel data from 21 companies from five industries observed for 14 years using System Generalized Method of Moments technique. The results indicate a negative significant impact of mergers and acquisitions on company performance, which supports the assertion raised by previous studies on the risks of mergers and acquisitions and behavioral theories of mergers and acquisitions. Moreover, internal growth has a positive insignificant impact on company performance, but its lag has a negative significant impact, while acquisition growth has a positive significant impact on return on assets but an insignificant impact on return on equity. The study concludes that companies should refrain from undertaking mergers and acquisitions, but where managers are desperate to grow, the best option is still acquisition growth as it is less detrimental compared to internal growth. Overall, this study provides valuable insights into the effects of mergers and acquisitions on company performance in Malawi and emphasizes the need for caution when considering such business strategies.