The performances of acquired firms in the steel industry: Do financial institutions cause bubbles?

• We examine the impact of acquisitions on the steelmaker's performances.
• We investigate whether acquisitions by financial institutions result in bubbles in the steel industry.
• Steelmakers acquired by financial institutions show poor operating performances, but a significant increase of PER.

This study investigates the impact of acquisitions on the steelmaker's performances including PER and technical efficiency in the world steel industry over the period 1992–2011. The study classifies the acquiring firms into two types, steelmakers and financial institutions, to capture the differences of the effect of acquisitions depending on the type of acquirers. In this context, the study examines whether acquisitions by financial institutions result in bubbles in the steel industry. Empirical results demonstrate that steelmakers acquired by financial institutions have achieved relatively poor or insignificant operating performances, although there is a statistically significant increase of PER.