Δρ. Κοnstantinos Bozos
Drawing insights from the resource-based view and agency theory, we investigate the role of two distinct types of slack, available and recoverable, on the performance of acquirers after a takeover deal. Considering that the influence of slack on performance is conditional upon the level of slack resources, we introduce the concepts of slack deficit vs. slack surplus to identify departures from industry norms. Since at any point in time, the two types of slack may co-exist within the organization at differing levels, we depart from the traditional ‘independence’ assumption and theorize on the ‘congruence/incongruence’ role of slack on post-acquisition performance. We use a sample of 3,851 large U.S. acquisitions during 2000-2014 and calculate mean ROA to isolate the effects on the acquirer’s performance three years after the deal. We find that post-acquisition performance is linked to the acquirer’s pre-existing slack with available and recoverable slack exhibiting both independent and conditional effects on performance. In particular, while independently slack is detrimental to performance, acquirers with incongruent levels can outperform all others; combining a tight and efficient operation (recoverable slack deficit) with leeway in working capital (available slack surplus) maximizes post-acquisition performance.
Date: 18 November 2021