MERGERS AND ACQUISITIONS IN JORDAN: ITS MOTIVES AND INFLUENCE ON COMPANY FINANCIAL PERFORMANCE AND STOCK MARKET PRICE

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Abstract

This research paper focuses on recent business trend in Jordan which attracted us as researchers to investigate Merger & Acquisition’s ability to create and realize more value than the parties can alone, and whether the value earned by the merged firms have motivated them to contribute to the combination. The method used to analyze post-merger financial performance was carried out by adopting the accounting return method and the stock price method, which measures and observes the stock market price in terms of market value, earnings per share (EPS), and price earnings ratio (P/E) of the merged firms. Analyzing the annual reports of the two Jordanian banks, the study concluded that the ratio analysis of AJIB and Safwa Bank show different trends after Merger & Acquisition. Our analysis shows decreasing values in the first two years after the acquisition, but gradually increasing values in subsequent years. The study concluded that the fluctuation of results may be attributed to the difficulties in managing the increased volume of assets after the merger as well as to non-financial reasons such as the human behavior of the employee resistance after the acquisition, where the employees of the acquired firm consider merger as a hostile takeover.

Keywords: Merger, Acquisition, Financial Performance, ROI, ROE, Stock Market Price

JEL Classification: M490; G140; G110; G120

Received: 12.01.2019

Accepted: 21.02.2019

Published online: 25.02.2019

How to cite this paper: Shaban, O. S., Al-hawatmah, Z., & Abdallah, A. A. (2019). Mergers and acquisitions in Jordan: Its motives and influence on company financial performance and stock market price. Corporate Ownership & Control, 16(2), 67-72. https://doi.org/10.22495/cocv16i2art7