Table 2 Research variables and measurement

Independent variable

Managerial ability

MA score

The value of managerial measures. The managerial ability can be seen in their efficiency of operational performance

Efficiency using DEA (Demerjian et al., 2012)

Dependent variables

MTBR_i

The market-to-book ratio of the acquiring firm after i-years of acquisition is adjusted for the industry median value of (i = 1,2,3 years)

\(\mathrm{MTBR}i= \frac{\mathrm{Market capitailzation}}{\mathrm{Net book value}}\)

(Gitman, 2009:169)

BHAR_it

By subtracting the normal buy-and-hold return from the realized buy-and-hold return, the investor calculates abnormal returns by holding onto stocks for an extended period of time (i = year of M&A; t = 1,2,3 years)

Pit = share price of a company i 1 year after M&A

Pi0 = share price of a company i at M&A

D1 = Cumulative dividend of stock i 1 year after M&A

It = IHSG 1 year after M&A

I0 = IHSG at M&A

(Fakhri, 2019)

Control variables

SIZE

The company's acquired market value at the end of the fiscal year prior to the takeover announcement, expressed as a logarithmic value

\(\mathrm{Size}=\mathrm{Ln total assets}\)

(Cui & Chi-Moon Leung, 2020)

LEV

At the end of the fiscal year, prior to the acquirer's announcement of its takeover, the total assets' book value included both short-term and long-term company debt

(Cui & Chi-Moon Leung, 2020)

MB

The acquisition of the market value of the common stock to the book value of equity at the end of the fiscal year prior to the announcement of the takeover is used to calculate the market book ratio

\(\mathrm{MB}=\frac{\mathrm{Market value}}{\mathrm{Book value}}\)

(Cui & Chi-Moon Leung, 2020)

TAX-LOSS (TL)

Future tax losses adjusted for the acquirer's pre-acquisition market value

Tax losses/pre-acquisition market value

(Cui & Chi-Moon Leung, 2020)

CASH

Whether the M&A is in cash or not

A dummy variable equals 1 if the transaction is only financed in cash and otherwise equal to 0

(Cui & Chi-Moon Leung, 2020)

STOCK

Whether the M&A is in share or not

A dummy variable equals 1 if the transaction is financed only by shares and 0 otherwise

(Cui & Chi-Moon Leung, 2020)

SG

The current year's sales from the acquiring company are reduced by the previous year's sales, divided by the last year's assets, or it can be called sales growth

\(\mathrm{SG}= \frac{\mathrm{Sales}(t)-\mathrm{sales}(t-1)}{\mathrm{Assets} (t-1)}\)

(Cui & Chi-Moon Leung, 2020)

HORIZON

Whether the M&A is horizontal or diversified

A dummy variable is equal to 1 if the acquiring and target firms are in the same industry and 0 otherwise. (Cui & Chi-Moon Leung, 2020)