Impact of Merger or Acquisition on Financial Performance of Firm: A Case Study of Pakistan Telecommunication Limited (PTCL)

Abstract

The study depicts pre and post event effect of merger and acquisition on the service industry in Pakistan. The study is divided into two parts. In the first part, regression model is used to analyze the impact of financial position ratios and profitability ratios on the bankruptcy score. In the next part, this study analyzes the trend of financial ratios in pre and post-merger and acquisition using a time series. PTCL, a service industry, is the focus of study with data ranging from year 2003 to 2009. The finding of the study has shown a positive significant impact of financial position and profitability ratios on the firm bankruptcy score. The findings from the second part show that the bankruptcy score is affected negatively, by using financial ratios, after the acquisition. Also in the long term, financial position of the firm remains unaffected. The data range shows a stable trend of financial position over the period of time. The findings of the study suggest the decline in performance of PTCL during the observed time period.