A comparative analysis of the market-based and accounting-based performance of diversifying and non-diversifying acquisitions in Hong Kong

Tsz Wan Cheng, T. Y. Leung

Research output: Journal article publicationJournal articleAcademic researchpeer-review

10 Citations (Scopus)


This paper investigates the short-term return performance and long-term operating performance of 36 partial mergers in Hong Kong during the period 1984-1996. We first conduct an event-study to evaluate the short-term market performance of the target, the bidder and a simulated combined portfolio consisting of both firms involved in the acquisition. The second method provides long-term performance indicators based on composite indices created from key financial ratios. The results of the event-study indicate that there are immediate share price gains to the target, acquiring and combined firms around the time the acquisition is announced. However, the long-term accounting-based performance analysis does not show a significant improvement in the 2 years following the acquisition for both the target and acquiring firms. No correlation is found between the short-term returns and the long-term performance indicators. These findings support the more recent literature on the potential benefits of diversification, and the view that diversifying acquisitions perform better than related acquisitions.
Original languageEnglish
Pages (from-to)763-789
Number of pages27
JournalInternational Business Review
Issue number6
Publication statusPublished - 1 Dec 2004


  • Acquisitions
  • Long-term performance
  • Mergers

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Marketing

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