Mergers and Acquisitions and Bank Performance in Europe: The Role of Strategic Similarities
37 Pages Posted: 13 Dec 2004
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: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Theory of Bank Regulation and Management Compensation
By Kose John, Anthony Saunders, ...
-
A Theory of Bank Regulation and Management Compensation
By Kose John, Anthony Saunders, ...
-
A Theory of Bank Regulation and Management Compensation
By Kose John and Lemma W. Senbet
-
Don't Put All Your Eggs in One Basket? Diversification and Specialization in Lending
-
Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?
-
Cross-Border Bank Mergers: What Lures the Rare Animal?
By Claudia M. Buch and Gayle L. Delong
-
The Effects of Cross-Border Bank Mergers on Bank Risk and Value
By Yakov Amihud, Gayle L. Delong, ...
-
The Effects of Cross-Border Bank Mergers on Bank Risk and Value
By Yakov Amihud, Gayle Delong, ...
-
The Effects of Cross-Border Bank Mergers on Bank Risk and Value
By Yakov Amihud and Gayle L. Delong
-
The Effects of Cross-Border Bank Mergers on Bank Risk and Value
By Yakov Amihud, Gayle L. Delong, ...