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

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  • Laetitia Lepetit
  • Stephanie Patry
  • Philippe Rous

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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File URL: http://www.tandfonline.com/doi/abs/10.1080/0960310042000233430
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 9 ()
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.
  2. 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.
  3. Fabozzi, Frank J. & Francis, Jack Clark, 1978. "Beta as a Random Coefficient," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(01), pages 101-116, March.
  4. 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.).
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Cited by:
  1. Ioannis Asimakopoulos & Panayiotis Athanasoglou,, 2009. "Revisiting the Merger and Acquisition Performance of European Banks," Working Papers 100, Bank of Greece.
  2. Maditinos D. & Theriou N. & Demetriades E., 2009. "The Effect of Mergers and Acquisitions on the Performance of Companies – The Greek Case of Ioniki-Laiki Bank and Pisteos Bank," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 111-130.
  3. Ongena, Steven & Penas, María Fabiana, 2009. "Bondholders' wealth effects in domestic and cross-border bank mergers," Journal of Financial Stability, Elsevier, vol. 5(3), pages 256-271, September.
  4. Mei, Bin & Sun, Changyou, 2008. "Event analysis of the impact of mergers and acquisitions on the financial performance of the U.S. forest products industry," Forest Policy and Economics, Elsevier, vol. 10(5), pages 286-294, April.
  5. Robert DeYoung & Douglas Evanoff & Philip Molyneux, 2009. "Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature," Journal of Financial Services Research, Springer, vol. 36(2), pages 87-110, December.
  6. Mikel Larreina, 2008. "Financial centres in peripheral regions: the effect of the financial services industry on regional economy - the case of the Scottish Financial cluster," CRIEFF Discussion Papers 0805, Centre for Research into Industry, Enterprise, Finance and the Firm.
  7. Peter Egger & Franz R. Hahn, 2006. "Endogenous Bank Mergers and Their Impact on Banking Performance," WIFO Working Papers 271, WIFO.

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