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Revisiting the Merger and Acquisition Performance of European Banks

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Author Info
Ioannis Asimakopoulos () (Bank of Greece)
Panayiotis Athanasoglou, () (Bank of Greece)

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Abstract

The study examines the value creation of Merger and Acquisition (M&A) deals in European Banking from 1990-2004. This is performed, first, by examining the stock price reaction of banks to the announcement of M&A deals and, second, by analysing the determinants of this reaction. The findings provide evidence of value creation in European banks as the shareholders of the targets have benefited from positive and (statistically) significant abnormal returns while those of the acquirers earn small negative but non-significant abnormal returns. In the case of the shareholders of the acquirers, domestic M&As and especially those between banks with shares listed on the stock market, seem to be more beneficial compared to cross-border ones or those when the target is unlisted. Shareholders of the targets earn in all cases positive abnormal returns. Finally, although the link between abnormal returns and fundamental characteristics of the banks is rather weak, it appears that the acquisition of smaller, less efficient banks generating more diversified income are more value creating, while acquisition of less efficient, liquid and characterised by higher credit risk banks is not a value creating option.

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Publisher Info
Paper provided by Bank of Greece in its series Working Papers with number 100.

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Length: 44 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:bog:wpaper:100

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Related research
Keywords: Bank mergers; mergers and acquisitions; abnormal returns;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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References listed on IDEAS
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    Other versions:
  4. Panayiotis P. Athanasoglou & Sophocles N. Brissimis, 2004. "The effect of mergers and acquisitions on bank efficiency in Greece," Economic Bulletin, Bank of Greece, Economic Research Department, issue 22, pages 7-31, January. [Downloadable!]
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  17. Laetitia Lepetit & Stéphanie Patry & Philippe Rous, 2004. "Diversification versus specialization: an event study of M&As in the European banking industry," Applied Financial Economics, Taylor and Francis Journals, vol. 14(9), pages 663-669, June. [Downloadable!] (restricted)
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