Effects Of Mergers On Financial Performance Of Companies Listed At The Nairobi Stock Exchange

Abstract

This research attempts to determine the effects of mergers on financial performance of companies listed at the Nairobi Stock Exchange (NSE). Theoretically it is assumed that mergers improves the performance of the companies due to increased market power, enhanced profitability, diversification of risks, synergy and various other qualitative and quantitative factors. Nairobi Stock Exchange has a total of forty eight listed companies and to carry out the research, a sample of twenty companies listed was taken for study. The sample consisted of ten companies that merged and ten that did not merged and the timeframe for analysis was from 1994-2005. The research was a descriptive research and involved collection of quantitative data. The secondary data was collected from NSE and other published reports for the period under study. The measures of performance used were: turnover, volume, market capitalization and profit. The data was analyzed with the aid of statistical tool, SPSS. Paired t-test procedure was used to compare the mean of two variables i.e. before and after merger. The results of the data analysis showed that all values i.e. turnover, volume, market capitalization and profit had a low significance value of less than 0.05 indicating that there was an improvement in performance after merger.