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СпутникиРНSpaceXРоскосмосNASABackground In emerging markets, acquisitions are increasingly used by firms as a faster way to expand, strengthen competitiveness, and gain strategic control. Despite this growing trend, previous studies still show mixed evidence on whether acquisitions actually improve firm valuation beyond the announcement period. Most existing research mainly focuses on short-term market reactions and general ownership categories, while ownership structures associated with stronger legal and managerial control have received less attention. Therefore, this study examines how strategic acquisitions affect firm valuation using EV/EBITDA as the main valuation measure and also investigates whether corporate governance moderates this relationship. Methods This study uses publicly listed companies on the Indonesia Stock Exchange (IDX), particularly firms that completed acquisitions resulting in ownership control of at least 66.67%. This threshold refers to the qualified majority provision regulated under Indonesian Company Law (Law No. 40 of 2007). The analysis applies panel data regression using the Fixed Effects model, along with year fixed effects and clustered standard errors. Changes in firm valuation are observed from the acquisition year (post0) up to the third year after the transaction (post3). After the sample selection process, the final dataset consists of 26 firms with 459 firm-year observations. Results The findings show that strategic acquisitions are not followed by immediate improvements in firm valuation, especially in the short term. In the first year after the acquisition (post1), EV/EBITDA shows a negative and statistically significant coefficient, indicating that firms may still be dealing with integration-related pressures such as restructuring costs, operational adjustments, and post-merger realignment. Meanwhile, the other post-acquisition periods do not show a statistically significant effect on firm valuation. The results also suggest that corporate governance does not significantly moderate the relationship between strategic acquisitions and firm valuation during the observed period. Conclusions Overall, value creation after an acquisition tends to take time rather than occur immediately. The success of an acquisition depends largely on how effectively the firm manages the integration process, maintains operational performance, and executes its long-term strategic objectives. As a result, the expected synergies and benefits from acquisitions are more likely to emerge gradually over time.
Over recent years, acquisitions have become increasingly common among firms operating in emerging markets, especially as companies face stronger global competition, expansion pressures, and the need to reorganize corporate resources more efficiently (Khan & Kalisz, 2024). What used to be seen mainly as passive investment activity has gradually shifted into a more strategic instrument that allows firms to obtain greater influence over corporate control and business direction. The motivation behind acquisitions has also changed over time. Rather than focusing only on short-term financial returns, many firms now view acquisitions as part of a longer-term strategy aimed at strengthening competitive advantage and integrating resources more effectively (Appel et al., 2016). Even so, studies examining the effect of acquisitions on firm valuation beyond the announcement period still produce mixed conclusions. This inconsistency suggests that post-acquisition valuation behavior needs to be understood in a more dynamic and contextual way (Ma et al., 2019).
In general, strategic acquisitions refer to acquisition activities intended to obtain controlling ownership and stronger strategic influence over a target company in support of long-term operational and competitive goals. Unlike passive share ownership, which is often associated with short-term investment motives, strategic acquisitions give acquiring firms a more active role in managerial decision-making, operational control, and resource allocation (Metzler et al., 2023). Prior studies indicate that ownership changes alone are not sufficient to increase firm value automatically. The extent to which acquisitions generate value depends largely on whether the acquiring firm gains effective control that can later be translated into synergy realization and improved operational performance after the acquisition takes place (Aktas et al., 2021). On the other hand, weak governance structures may cause concentrated ownership to create inefficiencies, integration difficulties, and agency conflicts that ultimately hinder value creation (Bauer & Friesl, 2022).
According to Indonesian company law, specifically Law No. 40 of 2007 concerning Limited Liability Companies (UUPT), amendments to the Articles of Association require approval from at least two-thirds, or 66.67%, of the voting rights represented at the General Meeting of Shareholders. Once shareholders exceed this threshold, they effectively gain substantial authority over important corporate decisions, including governance arrangements, managerial appointments, business direction, and major strategic policies. Several acquisition transactions in Indonesia reflect the use of this ownership threshold in practice. Examples include Sojitz Corporation’s acquisition of 66.67% ownership in PT Leading Vision Otomotif, PT Barito Pacific Tbk’s acquisition of 66.67% of Star Energy Geothermal, and the acquisition of 66.67% of PT Anugerah Surya Pacific Resources by PT Danusa Tambang Nusantara, a subsidiary of PT United Tractors Tbk.
Within strategic acquisition research, Firm Valuation Theory provides an important foundation for explaining how changes in ownership and corporate control may affect market valuation and firm value (Farinós et al., 2020). From the perspective of modern financial economics, firm value reflects the present value of expected future cash flows while also incorporating growth opportunities, risk profile, and capital structure considerations (Koller et al., 2020). Enterprise-based valuation measures such as EV/EBITDA are widely used in acquisition studies because they assess firm value relative to operating earnings while simultaneously accounting for both debt and equity components. Compared with equity-based measures alone, EV/EBITDA therefore provides a broader picture of operational performance and strategic value creation after acquisitions (Liu et al., 2025). Firm valuation itself is generally not static. Instead, it develops gradually as firms implement strategic initiatives, improve efficiency, and begin to realize post-acquisition synergies over time (Duong & Truong, 2021). As a result, the valuation impact of strategic acquisitions may not appear immediately after ownership changes occur, but instead emerge progressively as firms complete restructuring and integration processes (Bianconi & Tan, 2019).
From this standpoint, strategic acquisitions conducted at or above the two-thirds ownership threshold (≥66.67%) are expected to influence post-acquisition valuation dynamics in an important way. Corporate Control Theory suggests that higher ownership concentration strengthens monitoring mechanisms and managerial discipline, which may subsequently affect firm performance and market valuation (Faisal et al., 2020). Similarly, Agency Theory argues that concentrated ownership can reduce agency conflicts by aligning managerial interests more closely with those of controlling shareholders (Kong et al., 2020). Synergy Theory also explains that acquisitions may create value when firms successfully integrate complementary resources, resulting in operational efficiencies, economies of scale, and stronger competitive positioning (Mitchell & Stafford, 2001). However, earlier research also notes that integration complexity, restructuring costs, and coordination challenges may temporarily delay or weaken the realization of expected synergies during the early post-acquisition period (Haleblian et al., 2009). For this reason, the valuation effects of strategic acquisitions are more likely to emerge gradually rather than instantly.
At the same time, the extent to which strategic acquisitions improve firm valuation is closely related to the quality of post-acquisition corporate governance. Besides reducing agency conflicts, corporate governance also influences strategic decision-making, efficiency in resource allocation, and risk management practices (Castrillón, 2021). Previous studies suggest that stronger governance systems help firms implement strategic initiatives more effectively and align corporate actions with shareholder interests, particularly in uncertain business conditions (Tihanyi et al., 2017). In the M&A literature, corporate governance is sometimes proxied using the ratio of operating income to total assets, where higher values indicate stronger operational efficiency and governance quality (Xing et al., 2025). Xing et al. (2025), for example, find that Chinese listed firms with stronger governance quality tend to achieve better acquisition outcomes and higher acquisition activity, particularly in more financially developed markets. Their findings imply that effective governance allows firms to manage external resources more efficiently, reduce agency-related issues, and execute post-acquisition integration more effectively. In line with Corporate Control Theory, Agency Theory, and Synergy Theory, governance therefore becomes an important factor in determining whether newly acquired control can actually be translated into operational efficiency and stronger firm valuation after acquisitions.
Although mergers and acquisitions have been discussed extensively in prior literature, several gaps remain regarding the medium-term valuation effects of strategic acquisitions in emerging markets. Much of the earlier research focuses heavily on short-term market reactions around acquisition announcements and commonly uses conventional ownership thresholds ranging from 20% to 50% (Jensen & Ruback, 1983; Andrade et al., 2001). While ownership concentration is frequently associated with governance quality and firm valuation in emerging markets, relatively little attention has been directed toward ownership thresholds that carry legally meaningful strategic control under corporate law (Wang & Shailer, 2017).
In Indonesia specifically, most previous studies focus on institutional ownership, family ownership, or general majority ownership structures. Research that explicitly examines the qualified majority threshold of 66.67% remains limited, despite the significant control rights attached to this level under Law No. 40 of 2007. In addition, studies exploring how this ownership threshold affects post-acquisition valuation dynamics beyond announcement-period effects are still relatively scarce. This study therefore attempts to address these gaps by examining strategic acquisitions structured to obtain qualified majority control and by analyzing their dynamic effect on firm valuation in the Indonesian capital market. More specifically, the study investigates the effect of strategic acquisitions on firm valuation while also evaluating whether corporate governance moderates this relationship, using EV/EBITDA as the primary valuation measure. The objectives of the study are: (i) to analyze valuation dynamics across several post-acquisition periods, (ii) to examine the moderating role of corporate governance, and (iii) to provide evidence regarding legally meaningful ownership thresholds within the broader literature on acquisitions in emerging markets.
This research contributes both theoretically and practically. From a theoretical perspective, the study extends Corporate Control, Agency, and Synergy theories by linking legally meaningful ownership thresholds with dynamic market-based valuation measures. Although previous studies have shown that ownership control and governance quality can influence firm value (Brown & Caylor, 2006), much of the evidence still centers on short-term market reactions. By using EV/EBITDA as an enterprise-based valuation indicator, this study provides a broader understanding of post-acquisition valuation performance following strategic acquisitions. Practically, the findings are expected to offer useful insights for investors and corporate decision-makers regarding ownership structures that may support sustainable post-acquisition valuation performance, particularly in the Indonesian market context.
This study contributes to the literature in three main respects. First, it focuses specifically on acquisitions conducted at the two-thirds ownership threshold (≥66.67%), which represents a legally meaningful level of strategic control under Indonesian company law. Second, the study uses EV/EBITDA as an enterprise-based valuation measure to capture valuation dynamics beyond short-term announcement effects, rather than relying solely on short-window abnormal returns or absolute valuation measures. Third, corporate governance is incorporated as a moderating variable to explain how strategic control may influence operational efficiency and post-acquisition valuation performance. Taken together, these aspects provide a more comprehensive understanding of the relationship between ownership structure, governance quality, and valuation dynamics after strategic acquisitions.
Agency Theory discusses the relationship between shareholders and managers when ownership and managerial control are separated. Under these conditions, agency conflicts may arise because managers and shareholders do not always share the same interests, while information asymmetry can make monitoring more difficult (Panda & Leepsa, 2017). In strategic acquisitions, changes in controlling ownership are generally expected to strengthen monitoring and increase managerial oversight because the acquiring firm gains greater authority over strategic decisions, operational restructuring, and the allocation of company resources (Saravia et al., 2025). More concentrated ownership may therefore reduce managerial opportunism and improve organizational efficiency, especially in emerging markets where external governance mechanisms are often relatively weak (Iwasaki et al., 2022).
At the same time, Agency Theory also recognizes that the post-acquisition stage is not always straightforward. During the early integration period, firms may face higher coordination costs, greater managerial complexity, and increased operational uncertainty. Differences in organizational culture, restructuring processes, and integration adjustments can create temporary inefficiencies before operational improvements and acquisition synergies are fully achieved (Zollo & Meier, 2008). Because of this, the effect of strategic acquisitions on firm valuation is often not immediately visible after the transaction takes place. Instead, the impact tends to emerge gradually as firms stabilize the integration process and improve operational performance over time (Bianconi & Tan, 2019).
Corporate Control Theory explains that higher ownership concentration does not automatically lead to a proportional increase in control. Instead, once ownership reaches certain levels, shareholders may gain substantially greater strategic authority and decision-making power within the firm (Guerrero-Villegas et al., 2018). Share ownership therefore involves not only claims over cash flows but also control rights that enable shareholders to influence corporate strategy, restructuring decisions, and the long-term direction of the company (Brandão & Crisóstomo, 2024). When ownership passes important majority thresholds, acquiring firms generally obtain stronger authority to carry out restructuring initiatives, determine how resources are allocated, and implement operational changes aimed at improving long-term performance (Aktas et al., 2021).
In Indonesia, ownership above the 66.67% threshold has important legal consequences under Law No. 40 of 2007 because amendments to the Articles of Association require approval from at least two-thirds of voting rights. Acquisitions that exceed this threshold therefore reflect major changes in corporate control and may significantly affect firm performance as well as valuation dynamics (Kong et al., 2020). Even so, ownership concentration alone does not necessarily guarantee effective strategic control. The success of post-acquisition control also depends on how well the acquiring firm manages integration processes, operational restructuring, and strategic coordination after the transaction takes place (Wei & Clegg, 2020). Accordingly, the effect of changes in controlling ownership on firm valuation is expected to appear gradually, particularly as integration and restructuring processes become more stable over time.
Synergy Theory argues that acquisitions create value when the combined company is able to generate economic benefits that exceed the value each firm could achieve individually before the acquisition occurs (Sengupta, 2020). In practice, these synergies may come from operational efficiencies, economies of scale, better strategic coordination, resource sharing, and the reduction of overlapping activities after the integration process is completed (Ermawati et al., 2025). Through stronger strategic control, acquiring firms are generally expected to improve operational performance and support long-term value creation after the acquisition.
However, previous empirical evidence also indicates that the realization of synergies is rarely immediate. Firms often need time before the expected benefits are fully reflected in operational performance and firm valuation. Integration complexity, restructuring adjustments, coordination difficulties between organizations, and differences in corporate culture may slow down or even reduce the synergies initially expected during the early stages after the acquisition (Wei & Clegg, 2020). Because of this, the positive effects of strategic acquisitions are more likely to appear gradually rather than directly after the transaction takes place, as firms still need time to stabilize integration processes and convert operational improvements into sustainable valuation gains (Chaturvedi & Weigelt, 2024).
Firm Valuation Theory explains that firm value is closely related to the economic performance generated by a company’s operating assets as well as investors’ expectations regarding future cash flows and long-term growth prospects (Damodaran, 2021). In acquisition research, enterprise-based valuation measures such as EV/EBITDA are commonly used because they evaluate firm value relative to operating earnings while also taking both debt and equity into consideration. Compared with valuation measures that focus only on equity, EV/EBITDA is considered to provide a more comprehensive picture of firm performance and strategic value creation (Huang & Tan, 2024). Besides EV/EBITDA, market-based indicators such as the Price-to-Sales Ratio (PSR) and Market-to-Book Ratio (MBR) are also often used to capture investor expectations regarding growth opportunities and the future prospects attached to a company’s strategic assets (Damodaran, 2021).
From a dynamic perspective, firm valuation does not change instantly but tends to develop gradually as firms implement strategic initiatives, improve operational efficiency, and progressively realize post-acquisition synergies (Duong & Truong, 2021). In strategic acquisitions, improvements in operational performance and the effectiveness of integration processes are generally expected to influence investor expectations and market valuation over time, rather than immediately after the transaction is completed (Bianconi & Tan, 2019). Accordingly, post-acquisition valuation performance may continue to evolve throughout the medium term as firms stabilize integration activities, strengthen operational performance, and gradually realize strategic synergies more effectively (Renneboog & Vansteenkiste, 2019).
Strategic acquisitions generally refer to equity-based investments carried out to obtain controlling ownership and stronger strategic influence over a target company, rather than simply pursuing short-term financial returns. Through controlling ownership, the acquiring firm gains greater authority to influence strategic direction, operational policies, resource allocation, and long-term business decisions within the acquired company (Erel et al., 2012). This study specifically focuses on acquisition transactions that result in ownership exceeding 66.67%, since this threshold represents a decisive level of strategic control under Indonesian corporate law. Ownership at this level allows acquiring firms to strengthen monitoring mechanisms and carry out strategic restructuring more effectively after the acquisition takes place (Aggarwal et al., 2023).
More broadly, strategic acquisitions are usually undertaken with the expectation of creating long-term value through post-acquisition integration, operational improvements, and synergy realization (Signori & Vismara, 2018). Even so, concentrated ownership by itself does not automatically guarantee value creation. What matters more is how effectively firms are able to convert strategic control into operational coordination, successful integration, and sustainable post-acquisition valuation performance (Renneboog & Vansteenkiste, 2019). Because of this, the valuation impact of acquisitions is generally expected to appear gradually rather than immediately, as firms still require time to stabilize integration processes and realize operational synergies following changes in controlling ownership (Bianconi & Tan, 2019).
Corporate governance is generally understood as the mechanisms through which companies are directed and monitored, particularly in relation to accountability and the reduction of agency conflicts between managers and shareholders (Harymawan et al., 2020). In the context of strategic acquisitions, governance mechanisms are expected to support better decision-making, strengthen managerial supervision, reduce information asymmetry, and facilitate more effective post-acquisition integration (Ahmad et al., 2024). Strong governance structures may also help firms maintain strategic coordination and operational discipline after changes in controlling ownership, which can eventually support long-term performance and value creation (Annesi et al., 2025).
From a valuation perspective, firms with stronger corporate governance are often associated with better operational efficiency and more disciplined execution of strategic initiatives, both of which may contribute to more sustainable firm value improvements (Beiner et al., 2006). Even so, prior empirical findings regarding the moderating role of governance in acquisition performance are still mixed. The effectiveness of governance after acquisitions often depends on implementation quality, integration complexity, organizational conditions, and managerial discipline throughout the post-acquisition process (Bauer & Friesl, 2024). As a result, corporate governance may shape how effectively strategic acquisitions translate into higher firm valuation, although it does not necessarily guarantee positive outcomes after integration occurs.
Strategic acquisitions that involve controlling ownership are generally expected to affect firm valuation through changes in strategic control, operational efficiency, and the effectiveness of post-acquisition integration. Corporate Control Theory argues that higher ownership concentration gives acquiring firms greater authority to carry out strategic restructuring and make resource allocation decisions more effectively. At the same time, Synergy Theory explains that acquisitions may create value through operational efficiencies, economies of scale, and stronger strategic coordination after the integration process is completed (Pinelli et al., 2020). Firm Valuation Theory further suggests that improvements in operational performance and successful integration processes may gradually influence investor expectations and firm valuation over time (Damodaran, 2021).
Several previous studies support the argument that the effect of acquisitions on firm valuation tends to develop dynamically after integration takes place. Bianconi and Tan (2019), for example, show that the valuation impact of acquisitions is more likely to appear progressively in the medium term instead of immediately after the transaction occurs. Similarly, Chaturvedi and Weigelt (2024) find that post-acquisition restructuring and operational synergies may contribute to better firm performance and valuation outcomes. However, earlier research also points out that integration complexity and restructuring challenges can create temporary pressure on firm valuation during the early post-acquisition period (Haleblian et al., 2009). Overall, these findings indicate that strategic acquisitions are expected to have a significant relationship with firm valuation.
Strategic acquisitions significantly influence firm valuation.
Corporate governance is generally expected to shape the relationship between strategic acquisitions and firm valuation, particularly by strengthening managerial monitoring, reducing agency conflicts, and supporting smoother post-acquisition integration. From the perspective of Agency Theory, stronger governance mechanisms can help align managerial decisions with shareholder interests and encourage more effective strategic decision-making after an acquisition takes place (Jensen & Meckling, 1976). Good governance may also contribute to stronger operational discipline, better coordination throughout the integration process, and more effective realization of acquisition synergies during the post-acquisition period.
Prior studies suggest that firms with stronger governance structures are usually in a better position to handle integration complexity and achieve more favorable acquisition outcomes. Annesi et al. (2025), for instance, find that governance mechanisms can support more disciplined integration and stronger strategic execution after acquisitions. Likewise, Beiner et al. (2006) and Brown and Caylor (2006) report that higher governance quality tends to be associated with stronger firm value and better operational performance. Even so, empirical evidence regarding the moderating role of governance in acquisition performance remains mixed. The effectiveness of governance often depends on factors such as implementation quality, organizational conditions, and the way integration is managed during the post-acquisition stage (Ahmad et al., 2024). Therefore, while corporate governance may influence how far strategic acquisitions lead to operational improvements and valuation gains, it does not necessarily guarantee positive outcomes in every case.
Corporate governance moderates the relationship between strategic acquisitions and firm valuation.
This study uses a quantitative archival research approach and applies panel data regression to examine how strategic acquisitions affect firm valuation across several post-acquisition periods in the Indonesian capital market. The research is explanatory in nature because it seeks to analyze both the direct effect of strategic acquisitions on firm valuation and the moderating role of corporate governance in this relationship. The overall analysis is developed based on the perspectives of Agency Theory, Corporate Control Theory, Synergy Theory, and Firm Valuation Theory.
This research focuses on companies listed on the Indonesia Stock Exchange (IDX) that experienced strategic acquisitions resulting in changes in controlling ownership. Although the available dataset spans the period from 2005 to 2024, the analysis starts from 2008 in order to correspond with the implementation of Law No. 40 of 2007 concerning Limited Liability Companies. The sample selection was carried out using purposive sampling with several criteria. These include firms that completed acquisitions leading to controlling ownership of at least 66.67%, firms that consistently published complete annual financial statements with a fiscal year ending on December 31, and firms that remained after outlier observations were excluded.
To ensure that the study captured a sufficient post-acquisition period, only acquisition transactions completed no later than 2021 were included in the analysis. This restriction allows for a minimum observation window of three years after the acquisition. The chosen time horizon follows previous studies showing that post-acquisition performance effects are generally observable within one to three years after the transaction takes place (Cui & Leung, 2020). Initially, the population consisted of 479 companies listed on the IDX. After applying the ownership threshold, acquisition-period limitation, and reporting requirements, the sample was reduced to 72 firms. Further screening was then conducted to exclude transactions related to internal restructuring rather than actual strategic acquisitions. As a result, the final sample used in the empirical analysis consists of 26 firms with a total of 459 firm-year observations.
This study uses secondary financial and market data obtained from the Refinitiv database through institutional subscription access. The dataset includes information on acquisition transactions, ownership structures, financial performance, and market valuation measures for companies listed on the Indonesia Stock Exchange (IDX). All research variables were constructed from these data.
This study uses panel data regression with the Fixed Effects (FE) approach, combined with year fixed effects and clustered standard errors, in order to control for firm-specific characteristics as well as broader macroeconomic conditions. The decision to apply the Fixed Effects model is based on the Hausman test results, which indicate that firm-specific effects are correlated with the explanatory variables included in the regression model. To analyze both the direct effect of strategic acquisitions on firm valuation and the moderating role of corporate governance, the study estimates two regression models sequentially.
Model 1 focuses on examining valuation dynamics after acquisitions through the inclusion of several post-acquisition dummy variables, namely post0, post1, post2, and post3. These variables are intended to capture both short-term and medium-term changes in firm valuation across different post-acquisition periods. The model also includes several control variables consisting of the Price-to-Sales Ratio (PSR), Market-to-Book Ratio (MBR), EBITDA Margin (EM), and Firm Size (FS). These control variables are incorporated to account for valuation fundamentals, operational profitability, and firm-specific characteristics that may also influence firm valuation.
Valuationit=α0+β1Post0it+β2Post1it+β3Post2it+β4Post3it+β5PSRit+β6MBRit+β7EMit+β8FSit+ϕi+ωt+εit
Model 2 extends the specification used in Model 1 by adding the corporate governance variable (CG) together with interaction terms between CG and each post-acquisition period, namely post0_CG, post1_CG, post2_CG, and post3_CG. Through this model, the study aims to examine whether corporate governance influences the effectiveness of post-acquisition integration as well as the valuation impact of strategic acquisitions across different post-acquisition stages. The inclusion of these interaction terms is based on Agency Theory and Corporate Control Theory, both of which suggest that governance quality may shape how effectively firms manage integration processes and realize potential synergies following an acquisition.
Valuationit=α0+β1Post0it+β2Post1it+β2Post3it+β3Post4it+β5CGit+β6(Post0×CG)it+β7(Post1×CG)it+β8(Post2×CG)it+β9(Post3×CG)it+β10PSRit+β11MBRit+β12EMit+β13FSitϕi+ωt+εit
The post-acquisition observation window in this study is determined based on both practical considerations and findings from previous empirical studies. Earlier research suggests that the effects of acquisitions, including the realization of synergies, generally become observable within one to three years after the transaction is completed (King et al., 2004). Therefore, the inclusion of post0 until post3 is intended to capture not only the immediate response following the acquisition, but also the medium-term development of firm valuation after the post-acquisition integration process takes place.
Firm valuation in this study is measured using Enterprise Value to EBITDA (EV/EBITDA), which is a market-based valuation multiple commonly applied in corporate finance and acquisition research. EV/EBITDA reflects firm value relative to operating earnings while helping reduce distortions caused by differences in capital structure, taxation, and accounting policies across firms (Damodaran, 2021). Compared with several other valuation multiples, EV/EBITDA is generally considered more suitable for acquisition analysis because it incorporates both equity and debt components of firm value and minimizes distortions related to financing and accounting decisions. As a result, the measure is widely used to assess post-acquisition valuation performance and the realization of operational synergies (Koller et al., 2020).
In the context of strategic acquisitions, EV/EBITDA is often used to evaluate whether acquisition activities contribute to long-term value creation and operational improvement following changes in controlling ownership (Gaughan, 2018). A higher EV/EBITDA ratio is usually interpreted as reflecting stronger investor expectations regarding future growth opportunities, operational efficiency, and strategic value creation (Damodaran, 2021). For this reason, EV/EBITDA is considered appropriate for analyzing post-acquisition valuation dynamics within the frameworks of Firm Valuation Theory and Corporate Control Theory, both of which emphasize value creation through strategic control and long-term performance improvements after acquisitions (Bhaumik & Selarka, 2012). EV/EBITDA is calculated as follows:
EV/EBITDA=Enterprise ValueEBITDA
In this context, Enterprise Value (EV) represents the overall market value of the firm because it incorporates both equity and debt components. Meanwhile, EBITDA refers to earnings before interest, taxes, depreciation, and amortization, which is commonly used as an indicator of a firm’s core operating performance.
The independent variables in this study consist of several post-acquisition dummy variables that represent different stages after the acquisition takes place. The acquisition-year dummy (post0) is assigned a value of 1 in the year the acquisition is completed and 0 otherwise. This variable is intended to capture the immediate market response following the transaction (Bianconi & Tan, 2019). The first post-acquisition dummy (post1) takes a value of 1 in year t + 1 and represents the early integration stage, when firms may still face restructuring adjustments, integration costs, and operational coordination difficulties.
The second post-acquisition dummy (post2) equals 1 in year t + 2 and is used to capture the medium-term stage, particularly when operational improvements and synergy realization may begin to emerge more clearly. Likewise, the third post-acquisition dummy (post3) takes a value of 1 in year t + 3 and reflects the continuation of medium-term post-acquisition effects as firms continue stabilizing integration processes and strategic restructuring efforts. Collectively, the variables from post0 to post3 allow the study to observe the dynamic movement of firm valuation after strategic acquisitions from the perspectives of Agency Theory, Synergy Theory, and Corporate Control Theory (Gaughan, 2018).
Corporate governance (CG) is used in this study as the moderating variable and is measured using the ratio of operating income to total assets. A higher ratio indicates that the firm is more efficient in allocating and utilizing its resources, which may also reflect stronger governance-related operational efficiency and a greater managerial ability to convert company resources into operating performance (Xing et al., 2025). Through this proxy, corporate governance is viewed from an operational perspective, particularly in terms of how effectively management utilizes corporate resources after strategic acquisitions take place.
However, it is important to note that this proxy mainly represents governance-related operational efficiency rather than broader dimensions of corporate governance, such as board structure, ownership governance, or institutional monitoring mechanisms. Therefore, the interpretation of corporate governance in this study should be understood within the context of operational governance effectiveness following strategic acquisitions. CG is calculated as follows:
CG=Operating IncomeTotal Assets
The Price-to-Sales Ratio (PSR) measures how the market values a firm relative to its revenue-generating ability and is often used to reflect investor expectations regarding future growth opportunities (Damodaran, 2021). In general, firms with a higher PSR are viewed as having stronger market confidence in their future revenue growth and long-term expansion potential. PSR is calculated as follows:
PSR=Market CapitalizationRevenue
The Market-to-Book Ratio (MBR) represents the extent to which the market values a firm above its book equity and is commonly used to capture investor perceptions regarding growth opportunities and strategic value creation after acquisition activities (Fama & French, 1992). In general, a higher MBR indicates that investors expect stronger future performance and believe the firm can generate value beyond what is reflected in its recorded book value. MBR is calculated as follows:
MBR=Market CapitalizationBook Value of Equity
EBITDA Margin (EM) is used to measure operational profitability efficiency by showing how effectively a firm converts its revenue into core operating earnings, without being influenced by financing decisions or accounting methods (Koller et al., 2020). In general, firms with higher EBITDA margins are considered to have stronger operational performance and better cost-control efficiency. EM is calculated as follows:
EM=EBITDARevenue
Firm Size (FS) is included as a control variable to account for scale effects, since differences in firm scale can independently influence valuation outcomes. In practice, larger firms often have greater access to resources, wider market reach, and more stable operating structures, which may affect firm valuation even outside the main variables being studied. For this reason, firm size is measured using the natural logarithm of total assets. FS is calculated as follows:
FS=ln(Total Assets)
Data analysis in this study is carried out in three main steps. In the first step, descriptive statistics and a Pearson correlation matrix are generated to describe the overall distribution of all variables and to get a sense of how the variables are related to each other at the bivariate level. In the second step, multicollinearity is checked using Variance Inflation Factor (VIF) values, while the Hausman test is conducted to decide whether the Fixed Effects Model (FEM) or the Random Effects Model (REM) is more suitable given the structure of the panel data. In the final step, both regression models are estimated using STATA. Standard errors are clustered at the firm level to address potential within-firm correlation in the error terms. Statistical significance is assessed using the 10%, 5%, and 1% significance levels.
Table 1 shows that there is quite a wide variation in both valuation and financial performance across the firms in the sample. EV/EBITDA is fairly dispersed, which suggests that firms differ significantly in terms of market expectations, operational results, and how their valuation evolves after acquisitions. The fact that the minimum value is negative (−38.475) indicates that some firms experienced periods of negative EBITDA, which can happen when companies are still dealing with integration issues, restructuring expenses, operational adjustments, or even temporary financial stress during the post-acquisition phase. In the context of strategic acquisitions, this kind of short-term earnings pressure is often associated with post-merger integration challenges and the fact that synergy gains are not realized immediately after changes in control (Haleblian et al., 2009).
On the other end, the very high maximum EV/EBITDA (98.550) as shown in the Table 1 suggests that there are firms in the sample that are valued quite optimistically by the market, likely because investors expect strong future growth and potential synergies from the acquisition. This aligns with Firm Valuation Theory, which emphasizes that valuation multiples are heavily driven by investor expectations (Koller et al., 2020) regarding future growth opportunities and long-term strategic performance (Damodaran, 2021). Overall, the large spread in EV/EBITDA implies that post-acquisition valuation outcomes are not uniform across firms but instead vary depending on how well integration is executed, how strong operational performance is, and how the market perceives prospects during the post-acquisition period (Alexandridis et al., 2012).
As further illustrated in the Table 1, the post-acquisition dummies (post0 to post3) are relatively evenly distributed across the observation window, which supports the use of panel regression to analyze valuation dynamics after acquisitions. Other variables such as PSR, MBR, EM, CG, and FS also show noticeable variation across firms, reflecting differences in operating conditions, governance quality, and market positioning. This kind of heterogeneity is typical in acquisition studies that combine firms from different industries and stages of development (Alexandridis et al., 2012).
The correlation matrix in the Table 2 suggests that most of the independent variables are only weakly to moderately correlated with each other, which indicates that the model is not heavily affected by multicollinearity issues. EV/EBITDA shows a positive relationship with PSR, MBR, EM, and FS, meaning that firms with stronger market valuation, higher profitability, and larger scale tend to also record higher valuation multiples. On the other hand, EV/EBITDA is negatively correlated with CG and the post-acquisition dummies, especially post1 (−0.067). This pattern may reflect the fact that the early post-acquisition phase is often accompanied by integration challenges, restructuring expenses, and market uncertainty that can temporarily suppress firm valuation. Similar findings have been documented in acquisition literature, where short-term pressure after mergers is often observed before longer-term synergies are realized (Bauer & Friesl, 2024).
Overall, the relatively low correlations among the explanatory variables as reported in Table 2 suggest that each variable is capturing a different aspect of the firms, whether financial, operational, or strategic in nature. This supports the use of panel regression and reduces concerns that multicollinearity will distort the estimation results. Similar patterns are also commonly reported in studies that use heterogeneous samples across industries and firm life cycles (Baker & English, 2021).
The multicollinearity test results further confirm that the model is not affected by serious multicollinearity. All Variance Inflation Factor (VIF) values are relatively low, with the highest value still well below the commonly used threshold of 10. This indicates that the independent variables are not strongly linearly dependent on each other, allowing the regression estimates to remain stable and reliable. As a result, the model is considered appropriate for further analysis using the fixed effects panel regression approach. Comparable results are frequently found in panel-based studies in corporate finance and acquisition research (Wooldridge, 2021).
In addition, the Hausman test results show that the Fixed Effects Model (FEM) is more suitable than the Random Effects Model (REM), as indicated by a Prob > chi2 value below the 5% level. This implies that unobserved firm-specific characteristics are correlated with the explanatory variables in the model. In the context of strategic acquisitions, firms often differ in aspects such as governance quality, managerial capability, integration effectiveness, and operational efficiency, all of which may also affect valuation outcomes. For this reason, the Fixed Effects approach is preferred because it controls for time-invariant firm heterogeneity and produces more consistent estimates in panel data settings. This approach is also consistent with panel data literature in corporate finance that emphasizes the importance of accounting for unobserved firm-specific effects (Baltagi, 2021; Ullah & Ullah, 2022).
The regression results from in Table 3 from Model 1 show that strategic acquisitions do not translate into an immediate improvement in firm valuation in the short run. In particular, the coefficient on post1 is negative (−6.7563) and statistically significant (p = 0.037), indicating that EV/EBITDA tends to drop in the first year after an acquisition. This pattern is usually consistent with what happens when firms are still adjusting right after things like integration difficulties, restructuring expenses, operational realignment, and general uncertainty in the market can all put pressure on valuation during this early phase of post-merger integration (Haleblian et al., 2009). Similar evidence is also documented in King et al. (2004) and Bauer and Matzler (2014), who both show that acquisitions often create short-term disruption before any strategic benefits or synergies start to show up in performance.
From an Agency Theory perspective, this outcome can be understood as a period where agency costs and coordination problems tend to increase. After an acquisition, firms often face more complex organizational structures and heavier managerial demands, which can slow down decision-making and create inefficiencies (Jensen & Meckling, 1976). Synergy Theory also supports this interpretation, since the benefits expected from acquisitions are rarely immediate and usually take time to materialize in actual operational and financial outcomes (Gaughan, 2018). In line with this, the coefficients for post0 (−4.0927), post2 (−4.2036), and post3 (−4.6962) are not statistically significant, suggesting that the valuation effect is mainly concentrated in the early post-acquisition stage rather than sustained across later periods.
At the same time, as further shown in Table 3 PSR (coef. 1.1655, p = 0.003), MBR (coef. 1.2916, p = 0.000), and EM (coef. 18.1334, p = 0.000) show positive and significant relationships with EV/EBITDA. This implies that firms with stronger market expectations, higher valuation multiples, and better operational profitability tend to be valued more highly by the market. This finding is consistent with Firm Valuation Theory, which emphasizes that investor expectations about future growth and long-term performance play a central role in determining valuation (Damodaran, 2012). From a Corporate Control Theory angle, acquisitions are expected to strengthen control and improve long-term value through better resource allocation and managerial oversight (Chaturvedi & Weigelt, 2024), although the market typically needs time to verify whether those expected gains are actually realized. Finally, FS is not statistically significant (coef. 0.0124, p = 0.324), which suggests that firm size alone does not meaningfully explain differences in valuation during the post-acquisition period.
The regression results presented in Table 4 from model 2 shows a pattern that is largely consistent with Model 1, meaning that strategic acquisitions still do not lead to an immediate improvement in firm valuation in the short run. The coefficient on post1 (−6.4150) remains negative and statistically significant (p = 0.073), reinforcing the idea that the first year after an acquisition is the most sensitive period for firms. During this stage, companies are typically still dealing with integration work, restructuring decisions, and a certain level of uncertainty from the market.
Seen through Agency Theory, this early post-acquisition phase is often associated with higher agency costs and more complicated managerial coordination, mainly because the organization structure is being reshaped and responsibilities are being adjusted (Jensen & Meckling, 1976). Synergy Theory also fits this result, since the benefits from acquisitions are not something that appears instantly; instead, they usually require time before they can be fully reflected in financial and operational performance (Gaughan, 2018). This interpretation is also in line with earlier findings by Haleblian et al. (2009) and Bauer and Matzler (2014), which show that integration complexity often delays the realization of acquisition benefits.
When compared with Model 1, Model 2 adds corporate governance (CG) as a moderating variable. As shown in Table 4, the results indicate that CG has a negative and significant relationship with EV/EBITDA (coef. -24.8253, p = 0.043). In other words, firms with higher operational efficiency tend to be associated with lower valuation multiples during the period of analysis. One way to interpret this is that the market may be pricing these firms more conservatively, possibly because stable operating performance is often linked with lower perceived growth potential compared to firms pursuing more aggressive expansion strategies.
However, the interaction terms between CG and the post-acquisition dummies (post0_CG to post3_CG) are not statistically significant, with p-values ranging from 0.551 to 0.790. This suggests that, in this sample, corporate governance does not meaningfully change how acquisitions affect firm valuation across the post-acquisition periods. Meanwhile, PSR (coef. 1.1519, p = 0.003), MBR (coef. 1.4373, p = 0.000), and EM (coef. 5.6915, p = 0.099) remain positive and significant, reinforcing the idea that valuation is still largely driven by market expectations, valuation fundamentals, and operational profitability. This is consistent with Firm Valuation Theory, which emphasizes that long-term growth expectations tend to play a stronger role in shaping valuation than acquisition events themselves (Damodaran, 2012).
Taken together, the results from Model 1 and Model 2 point to a fairly consistent conclusion: strategic acquisitions carried out at or above the 66.67% qualified majority threshold do not immediately translate into higher firm valuation. The only statistically meaningful effect appears in the first year after the acquisition (post1), where EV/EBITDA declines significantly. This pattern is consistent with the dynamic view of post-acquisition value creation proposed by Bianconi and Tan (2019) and Chaturvedi and Weigelt (2024), and aligns with Agency Theory, Corporate Control Theory, and Synergy Theory, all of which emphasize that integration frictions, restructuring costs, and coordination challenges can temporarily suppress valuation before longer-term gains are realized.
The fact that post0, post2, and post3 are not significant suggests that the negative effect is not persistent. Instead, it is mainly concentrated in the early integration stage. In practical terms, the first year after an acquisition seems to be the most sensitive period, after which firm valuation tends to stabilize rather than continue declining or improving in a systematic way. At the same time, the consistent significance of PSR, MBR, and EM across both models reinforces the idea that firm valuation is driven more steadily by market expectations, underlying valuation fundamentals, and operational performance than by acquisition events themselves.
One interesting finding is that corporate governance, proxied by the ratio of operating income to total assets, does not moderate the relationship between strategic acquisitions and firm valuation in any of the post-acquisition periods. Even though CG has a negative and significant direct effect in Model 2, none of the interaction terms (post0_CG to post3_CG) are statistically significant. One possible explanation is that this proxy mainly captures operational efficiency, while broader governance dimensions—such as board structure, audit quality, or institutional monitoring—are not fully reflected (Ahmad et al., 2024; Annesi et al., 2025). Another possibility is that the integration burden in the first post-acquisition year is simply too strong, so differences in governance efficiency are not enough to meaningfully alter valuation outcomes in the short run.
Overall, the findings extend Corporate Control Theory, Agency Theory, and Synergy Theory by linking a legally meaningful ownership threshold (≥66.67% under Indonesian company law) with dynamic valuation outcomes measured using EV/EBITDA. In contrast to earlier studies that mainly focus on short-term announcement effects, this study shows that the valuation implications of acquisitions unfold gradually and depend more on integration quality, operational execution, and strategic follow-through than on the ownership transfer itself.
Taken as a whole, the results support the view that synergy realization takes time (Damodaran, 2012; Gaughan, 2018). In the short run, investors still seem to rely more on growth expectations and fundamental performance indicators when valuing firms, rather than reacting directly to acquisition events. This has an important practical implication: firms should pay close attention to post-acquisition integration, especially in the first year, by strengthening coordination, execution of restructuring, and communication processes to reduce temporary valuation pressure (Haleblian et al., 2009).
Several limitations should also be acknowledged. The relatively small sample size (26 firms) and the focus on acquisitions above the 66.67% threshold may limit generalizability. In addition, the governance proxy used here mainly reflects operational efficiency and does not fully capture broader governance mechanisms such as board composition or institutional monitoring. The three-year observation window may also be too short to fully capture longer-term synergy realization, while differences in acquisition motives and industry characteristics are not explicitly modeled.
Future research could extend the post-acquisition window beyond three years, distinguish acquisitions by strategic intent or industry setting, and incorporate richer governance and organizational variables such as board structure, managerial capability, innovation capacity, and integration capability. Comparative studies between domestic and cross-border acquisitions could also provide additional insight into whether valuation dynamics differ across institutional environments.
In conclusion, this study shows that strategic acquisitions do not immediately improve firm valuation. The first post-acquisition year is characterized by a significant decline in EV/EBITDA, likely driven by integration and restructuring pressures (Zollo & Meier, 2008), while later periods show no significant effects. Valuation is instead consistently explained by PSR, MBR, and EM, while firm size is not significant. Corporate governance has a direct effect but does not moderate acquisition outcomes, suggesting that operational efficiency alone is not sufficient to shape how acquisitions translate into valuation changes.
This study did not involve human participants, human-subject data, personal data, or animals. The analysis was conducted exclusively using secondary financial and market data obtained from the Refinitiv database, covering publicly listed companies on the Indonesia Stock Exchange (IDX). No primary data were collected, and no interaction with individuals occurred during the research process. Therefore, ethical approval or Institutional Review Board (IRB) approval was not required.
The data supporting the findings of this study were obtained from Refinitiv Workspace under an institutional license agreement held by Universitas Pelita Harapan. Due to licensing restrictions, the authors are not permitted to publicly share the raw data.
Researchers wishing to access the data may request access directly from Refinitiv (LSEG) through a valid subscription or licensing agreement. Information regarding access procedures, licensing requirements, and subscription options is available through Refinitiv Workspace at https://workspace.refinitiv.com and through LSEG’s official data and analytics services. Access to the data is subject to the provider’s licensing terms and applicable subscription fees. The authors had no special access privileges beyond those granted under the institutional license.
This study reports an observational archival panel data analysis of publicly listed companies in Indonesia using secondary financial and market data obtained from the Refinitiv database. The reporting of the study follows the principles of the STROBE guidelines for observational research, insofar as they are applicable to non-clinical archival studies in finance.
The authors would like to express sincere gratitude to the master’s Program in Management at Universitas Pelita Harapan for the academic support and guidance provided throughout this research. Appreciation is also extended to the reviewers and the editorial board for their valuable comments and constructive feedback on this manuscript.
Bethanovia Gloria, S.E., and Aisyah Dila Kusumah, S.Si., are Master of Management candidates with a concentration in Finance at Universitas Pelita Harapan. Bethanovia Gloria works in Corporate Strategic Planning at a state-owned healthcare holding company in Indonesia, while Aisyah Dila Kusumah works in Business Development at a state-owned downstream energy company in Indonesia. Their research interests include mergers and acquisitions, corporate governance, and corporate finance. Dr. Herlina Lusmeida, S.E., M.M., Ak., CA., is a lecturer in the Accounting Program at Universitas Pelita Harapan, Indonesia, whose research focuses on corporate governance, sustainability, performance management, and corporate finance.