This paper examines the post-merger operating performance of 50 large mergers between U.S. public industrial firms completed between 1979 and 1983. The study finds that merged firms show significant improvements in asset productivity, leading to higher post-merger operating cash flow returns. These improvements do not come at the expense of long-term viability, as the firms maintain their capital expenditure and R&D rates relative to their industries. The positive relation between post-merger increases in operating cash flows and abnormal stock returns at merger announcements suggests that expectations of economic improvements underlie the equity revaluations of the merging firms. The study also explores the sources of these gains, finding that they are primarily driven by increased asset productivity rather than tax benefits or increased monopoly rents. The findings have important implications for both managerial and public policy debates on the desirability of mergers.This paper examines the post-merger operating performance of 50 large mergers between U.S. public industrial firms completed between 1979 and 1983. The study finds that merged firms show significant improvements in asset productivity, leading to higher post-merger operating cash flow returns. These improvements do not come at the expense of long-term viability, as the firms maintain their capital expenditure and R&D rates relative to their industries. The positive relation between post-merger increases in operating cash flows and abnormal stock returns at merger announcements suggests that expectations of economic improvements underlie the equity revaluations of the merging firms. The study also explores the sources of these gains, finding that they are primarily driven by increased asset productivity rather than tax benefits or increased monopoly rents. The findings have important implications for both managerial and public policy debates on the desirability of mergers.