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Diversification versus specialization: an event study of M&As in the European banking industry

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Author Info
Laetitia Lepetit
Stéphanie Patry
Philippe Rous

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Abstract

This study examines the stock market valuation in terms of expected gains of mergers and acquisitions (M&As) amongst banks that were announced from 1991 to 2001 in 13 European markets. M&As are classified according to activity, geographic specialization or diversification. A bivariate GARCH model is used to estimate abnormal returns taking beta conditional variability into account. The results document that there is, on average, a positive and significant increase in value for the group of targets' banks. Moreover, it is found that on average there is a positive and significant market reaction for the two types of transactions: cross-product diversification and geographic specialization.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 9 (June)
Pages: 663-669
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Handle: RePEc:taf:apfiec:v:14:y:2004:i:9:p:663-669

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  1. Houston, Joel F. & Ryngaert, Michael D., 1994. "The overall gains from large bank mergers," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1155-1176, December. [Downloadable!] (restricted)
  2. Timothy H. Hannan & John D. Wolken, 1989. "Returns to bidders and targets in the acquisition process: evidence from the banking industry," Finance and Economics Discussion Series 64, Board of Governors of the Federal Reserve System (U.S.).
  3. Cybo-Ottone, Alberto & Murgia, Maurizio, 2000. "Mergers and shareholder wealth in European banking," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 831-859, June. [Downloadable!] (restricted)
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