Revisiting the Merger and Acquisition Performance of European Banks

Posted: 30 Oct 2012

Multiple version iconThere are 2 versions of this paper

Date Written: October 29, 2012

Abstract

The study examines the value creation of Merger and Acquisition (M&A) deals in European Banking from 1990-2004. This is performed, first, by examining the stock price reaction of banks to the announcement of M&A deals and, second, by analysing the determinants of this reaction. The findings provide evidence of value creation in European banks as the shareholders of the targets have benefited from positive and (statistically) significant abnormal returns while those of the acquirers earn small negative but non-significant abnormal returns. In the case of the shareholders of the acquirers, domestic M&As and especially those between banks with shares listed on the stock market, seem to be more beneficial compared to cross-border ones or those when the target is unlisted. Shareholders of the targets earn in all cases positive abnormal returns. Finally, although the link between abnormal returns and fundamental characteristics of the banks is rather weak, it appears that the acquisition of smaller, less efficient banks generating more diversified income are more value creating, while acquisition of less efficient, liquid and characterised by higher credit risk banks is not a value creating option.

Keywords: Bank mergers, mergers and acquisitions, abnormal returns

JEL Classification: G14, G21, G34

Suggested Citation

Athanasoglou, Panayiotis P. and Asimakopoulos, Ioannis, Revisiting the Merger and Acquisition Performance of European Banks (October 29, 2012). International Review of Financial Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2168395

Panayiotis P. Athanasoglou (Contact Author)

Investments & Wealth Institute (IWI) USA ( email )

POB 78519
GR 17603 Athens, 17603
Greece

Ioannis Asimakopoulos

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

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