MERGER AND ACQUISITION: EFFECT ON FINANCIAL AND EFFICIENCY PERFORMANCE OF COMPANY LISTED IN INDONESIA STOCK EXCHANGE

Abstract

The number of Merger and Acquisition in Indonesia has tended to increase starting from 2015 to 2017. However, it is still not clear if these activities give positive effect to company’s financial and efficiency performance. This research is to analyze the effect of M&A from the companies that listed in Indonesia Stock Exchange. The periods are used within 2006 until 2013. To check the statistical significance difference of financial performance before and after M&A, Current Ratio, Debt to Equity Ratio, Total Asset Turnover, Net Profit Margin, Return on Asset, Return on Equity, Return on Investment, and Earning per Share are used. Moreover, those ratios also used to compare companies’ financial performance post activity with industry average. Furthermore, fixed asset, salary expense, and revenue are selected as input and output variables to identify if companies’ efficiency improve after M&A. The data used consist of three years before and after M&A. Wilcoxon Signed Rank test is employed to test financial ratios and DEA is applied to measure company’s efficiency. There are three findings obtained from the research. First, M&A do not give significance effect on companies’ financial performance, TATO is the only ratio which experience significance different. Second, M&A do not make companies’ financial performance perform above industry average, and third, do not improve most of companies’ efficiency. There is indication that these activities mainly driven by the motive of tax consideration.