The study initially examined the immediate effects that conglomerate acquisitions have on the beta level of conglomerate and nonconglomerate acquiring firms. An analysis was then made of the long-run beta trends of firms that actively engage in conglomerate mergers. The results of the short-term comparative analysis have indicated that systematic risk behavior tends to be responsive in varying degrees to major conglomerate merger activity—with betas changing as a function of the combined premerger values and ρ2 measures showing improvement upon acquisition. At the same time, the regression results clearly revealed that the responsiveness of β to premerger marketrelated variables was considerably greater for the nonconglomerate firms. In contrast, the results of the comparative long-term analysis suggested that the differential effects of conglomerate merger activity on systematic risk are more of a marginal or limited nature. That is, unless the firm conducted extensive merger activity, the long-run performance of β and ρ2 indicated that conglomerate mergers have only contributed to increased absolute and relative systematic risk levels—the same pattern exhibited by the nonconglomerate, nonmerging sample.

The current merger movement has been characterized by the willingness of the management of some acquiring companies to pay substantial merger premiums. A merger premium exists when the common stockholders of an acquired company receive cash and/or securities possessing a value greater than the company's premerger market value. The rationalization or justification of these “premiums” is based on a merger synergy concept. Contemporary merger literature recognizes two broad forms of merger synergy — the potential for greater operating efficiencies [14] and/or potential financial benefits — with the latter containing instantaneous [12] and real elements [1, 7, 9, 10, 11, 13].