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M&As performance in the European financial industry

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  • José Manuel Campa

    ()
    (Banco de España)

  • Ignacio Hernando

    ()
    (Banco de España)

Abstract

This paper looks at the performance record of M&As that took place in the European Union financial industry in the period 1998-2002. First, the paper reports evidence on shareholder returns from the merger. Merger announcements implied positive excess returns to the shareholders of the target company around the date of the announcement, with a slight positive excess-return on the 3 months period prior to announcement. Returns to shareholders of the acquiring firms were essentially zero around announcement. One year after the announcement, excess returns were not significantly different from zero for both targets and acquirers. The paper also provides evidence on changes in the operating performance for the subsample of merges involving banks. M&As usually involved targets with lower operating performance than the average in their sector. The transaction resulted in significant improvements in the target banks performance beginning on average two years after the transaction was completed. Return on equity of the target companies increased by an average of 7%, and these firms also experience efficiency improvements.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/05/Fic/dt0516e.pdf
File Function: First version, July 2005
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0516.

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Length: 40 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:bde:wpaper:0516

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References

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  1. Allen N. Berger & Robert DeYoung & Hesna Genay & Gregory F. Udell, 1999. "Globalization of financial institutions: evidence from cross-border banking performance," Working Paper Series, Federal Reserve Bank of Chicago WP-99-25, Federal Reserve Bank of Chicago.
  2. Cybo-Ottone, Alberto & Murgia, Maurizio, 2000. "Mergers and shareholder wealth in European banking," Journal of Banking & Finance, Elsevier, Elsevier, vol. 24(6), pages 831-859, June.
  3. Allen N. Berger & Robert DeYoung, 2000. "The effects of geographic expansion on bank efficiency," Working Paper Series, Federal Reserve Bank of Chicago WP-00-14, Federal Reserve Bank of Chicago.
  4. Carletti, Elena & Hartmann, Philipp & Spagnolo, Giancarlo, 2003. "Bank mergers, competition and liquidity," Working Paper Series, European Central Bank 0292, European Central Bank.
  5. Manganelli, Simone & Hartmann, Philipp & Maddaloni, Angela, 2003. "The euro area financial system: structure, integration and policy initiatives," Working Paper Series, European Central Bank 0230, European Central Bank.
  6. Pilloff, Steven J, 1996. "Performance Changes and Shareholder Wealth Creation Associated with Mergers of Publicly Traded Banking Institutions," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 28(3), pages 294-310, August.
  7. Edward J. Kane, 2000. "Incentives for banking megamergers: what motives might regulators infer from event-study evidence?," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 671-705.
  8. Buch, Claudia M, 2003. " Information or Regulation: What Drives the International Activities of Commercial Banks?," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 35(6), pages 851-69, December.
  9. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 46(4), pages 433-52, December.
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  11. Lieven Baele, 2004. "Measuring European Financial Integration," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 20(4), pages 509-530, Winter.
  12. DeLong, Gayle L., 2001. "Stockholder gains from focusing versus diversifying bank mergers," Journal of Financial Economics, Elsevier, Elsevier, vol. 59(2), pages 221-252, February.
  13. Walter, Ingo, 2004. "Mergers and Acquisitions in Banking and Finance: What Works, What Fails, and Why?," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195159004, October.
  14. Corvoisier, Sandrine & Gropp, Reint, 2001. "Bank Concentration and Retail Interest Rates," Working Paper Series, European Central Bank 0072, European Central Bank.
  15. Campa, José Manuel & Hernando, Ignacio, 2004. "Shareholder Value Creation in European M&As," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4400, C.E.P.R. Discussion Papers.
  16. Jaap Bikker & Sandra Wesseling, 2003. "Intermediation,integration and internationalisation: a survey on banking in Europe," DNB Occasional Studies, Netherlands Central Bank, Research Department 103, Netherlands Central Bank, Research Department.
  17. Altunbas, Yener & Marqués, David, 2008. "Mergers and acquisitions and bank performance in Europe: The role of strategic similarities," Journal of Economics and Business, Elsevier, Elsevier, vol. 60(3), pages 204-222.
  18. Amihud, Yakov & DeLong, Gayle L. & Saunders, Anthony, 2002. "The effects of cross-border bank mergers on bank risk and value," Journal of International Money and Finance, Elsevier, Elsevier, vol. 21(6), pages 857-877, November.
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Citations

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Cited by:
  1. Horst Gischer & Toni Richter, 2011. "'Global Player' im Bankenwesen - ökonomisch sinnvoll oder problembehaftet?," FEMM Working Papers 110012, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  2. 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, Springer, vol. 36(2), pages 87-110, December.
  3. John Goddard & Donal McKillop & John Wilson, 2009. "Which Credit Unions are Acquired?," Journal of Financial Services Research, Springer, Springer, vol. 36(2), pages 231-252, December.
  4. Horst Gischer & Toni Richter, 2014. "Produktivitätsmessung von Banken: die Cost Income Ratio – ein belastbares Performancemaß?," FEMM Working Papers 140008, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  5. Ricardo Correa, 2009. "Cross-Border Bank Acquisitions: Is there a Performance Effect?," Journal of Financial Services Research, Springer, Springer, vol. 36(2), pages 169-197, December.
  6. Lublóy, Ágnes & Tóth, Eszter, 2010. "A közép-kelet-európai bankfúziók eredményessége
    [The success of the bank mergers in Central Eastern Europe]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 37-58.
  7. Fabrice Roth, 2012. "Crise et régulation des marchés financiers : Quel impact sur les formes mutuelles dans l'assurance ?," Working Papers, HAL halshs-00692342, HAL.
  8. Pérez Montes, Carlos, 2014. "The effect on competition of banking sector consolidation following the financial crisis of 2008," Journal of Banking & Finance, Elsevier, Elsevier, vol. 43(C), pages 124-136.
  9. Enrique Benito, 2008. "Size, growth and bank dynamics," Banco de Espa�a Working Papers, Banco de Espa�a 0801, Banco de Espa�a.
  10. Asimakopoulos, Ioannis & Athanasoglou, Panayiotis P., 2009. "Revisiting the merger and acquisition performance of European banks," MPRA Paper 31994, University Library of Munich, Germany.
  11. Taher Hamza, 2009. "La performance à court et à long terme de l'acquéreur:l'impact de la détention d'une position de contrôle," Revue Finance Contrôle Stratégie, revues.org, revues.org, vol. 12(1), pages 33-65, March.
  12. José Campa & Ignacio Hernando, 2008. "The Reaction by Industry Insiders to M&As in the European Financial Industry," Journal of Financial Services Research, Springer, Springer, vol. 33(2), pages 127-146, April.

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