Pre-evaluating efficiency gains from potential mergers and acquisitions based on the resampling DEA approach: Evidence from China's railway sector

This study combines resampling DEA and the potential merger gains model to pre-evaluate the efficiency gains of three representative M&A schemes (i.e. regional M&A, megamerger, and a coalition between 'strong' and 'weak' railway bureaus) for China's railway sector over the period 2011-2015. The results reveal that geographically meaningful M&As are better than the other two types in creating efficiency gains due to the special characteristic of the railway sector - network economics. The timing of M&As and the roles and endowments of the railway bureaus must also be considered before any merger. A proper M&A can produce a so-called `stimulant' effect in the short run, but as the `stimulant's efficacy' becomes exhausted over time, the M&A's effect will gradually turn weak. At this time, it is particularly important for policy-makers to introduce a series of desirable institutions. Finally, our empirical findings also support the view that an M&A between two (efficient or not) DMUs does not ensure positive efficiency gains.