Mergers and Acquisitions and Bank Performance in Europe: The Role of Strategic Similarities

37 Pages Posted: 13 Dec 2004

See all articles by David Marques-Ibanez

David Marques-Ibanez

European Central Bank (ECB)

Yener Altunbas

University of Wales, Bangor

Date Written: October 2004

Abstract

An unprecedented process of financial consolidation has taken place in the European Union over the past decade. Building on earlier US evidence, we examine the impact of strategic similarities between bidders and targets on post-merger financial performance. We find that, on average, bank mergers in the European Union resulted in improved return on capital. By making the assumption that balance-sheet resource allocation is indicative of the strategic focus of banks, we also find significantly different results for domestic and cross-border mergers. For domestic deals, it could be quite costly to integrate dissimilar institutions in terms of their loan, earnings, cost, deposits and size strategies. For cross-border mergers and acquisitions (M&As), differences of merging partners in their loan and credit risk strategies are conducive to a higher performance whereas diversity in their capital, cost structure as well as technology and innovation investments strategies are counterproductive from a performance standpoint.

Keywords: banks, M&As, strategic similarities

JEL Classification: G21, G34

Suggested Citation

Marques-Ibanez, David and Altunbas, Yener, Mergers and Acquisitions and Bank Performance in Europe: The Role of Strategic Similarities (October 2004). Available at SSRN: https://ssrn.com/abstract=587265 or http://dx.doi.org/10.2139/ssrn.587265

David Marques-Ibanez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)

Yener Altunbas (Contact Author)

University of Wales, Bangor ( email )

Bangor, Wales LL57 2DG
United Kingdom

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