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M&AS performance in the European financial industry

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Author Info
Campa, Jose M. () (IESE Business School)
Hernando, Ignacio (Banco de España)

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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 mergers. Merger announcements brought positive excess returns to the shareholders of the target company around the date of the announcement, with a slight positive excess return in the 3-month 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 either targets or acquirers. The paper also provides evidence on changes in operating performance for the subsample of mergers involving banks. M&As usually involved targets with lower-than-average operating performance for their sector. The transactions 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 the same firms also experienced efficiency improvements.

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File URL: http://www.iese.edu/research/pdfs/DI-0588-E.pdf
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Publisher Info
Paper provided by IESE Business School in its series IESE Research Papers with number D/588.

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Length: 29 pages
Date of creation: 10 Apr 2005
Date of revision:
Handle: RePEc:ebg:iesewp:d-0588

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Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
Web page: http://www.iese.edu/
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Related research
Keywords: mergers and acquisitions; financial industry;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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, vol. 21(6), pages 857-877, November. [Downloadable!] (restricted)
  2. Gual, Jordi, 2004. "The Integration of EU Banking Markets," CEPR Discussion Papers 4212, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Kane, Edward J, 2000. "Incentives for Banking Megamergers: What Motives Might Regulators Infer from Event-Study Evidence?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 671-701, August.
  4. John D. Lyon & Brad M. Barber & Chih-Ling Tsai, 1999. "Improved Methods for Tests of Long-Run Abnormal Stock Returns," Journal of Finance, American Finance Association, vol. 54(1), pages 165-201, 02. [Downloadable!] (restricted)
  5. Yener Altunbas & David Marqués Ibáñez, 2004. "Mergers and acquisitions and bank performance in Europe: the role of strategic similarities," Working Paper Series 398, European Central Bank. [Downloadable!]
    Other versions:
  6. Elena Carletti & Philipp Hartmann & Giancarlo Spagnolo, 2003. "Bank mergers, competition and liquidity," Working Paper Series 292, European Central Bank. [Downloadable!]
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  7. Lieven Baele, 2004. "Measuring European Financial Integration," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 509-530, Winter.
  8. Campa, José Manuel & Hernando, Ignacio, 2004. "Shareholder Value Creation in European M&As," CEPR Discussion Papers 4400, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Allen Berger & Robert DeYoung, 2001. "The Effects of Geographic Expansion on Bank Efficiency," Journal of Financial Services Research, Springer, vol. 19(2), pages 163-184, April. [Downloadable!] (restricted)
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  10. 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, vol. 28(3), pages 294-310, August. [Downloadable!] (restricted)
  11. Inês Cabral & Frank Dierick & Jukka Vesala, 2002. "Banking integration in the euro area," Occasional Paper Series 06, European Central Bank. [Downloadable!]
  12. Allen N. Berger & Robert DeYoung & Hesna Genay & Gregory F. Udell, 2000. "Globalization of financial institutions: evidence from cross-border banking performance," Finance and Economics Discussion Series 2000-04, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  13. DeLong, Gayle L., 2001. "Stockholder gains from focusing versus diversifying bank mergers," Journal of Financial Economics, Elsevier, vol. 59(2), pages 221-252, February. [Downloadable!] (restricted)
  14. Buch, Claudia M, 2003. " Information or Regulation: What Drives the International Activities of Commercial Banks?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 851-69, December.
  15. Corvoisier, Sandrine & Gropp, Reint, 2002. "Bank concentration and retail interest rates," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2155-2189, November. [Downloadable!] (restricted)
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  16. Hans Degryse, 2004. "The Impact of Technology and Regulation on the Geographical Scope of Banking," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 571-590, Winter.
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  17. J.A. Bikker & A.A.T. Wesseling, 2003. "Intermediation, integration and internationalisation: a survey on banking in Europe," Research Series Supervision (discontinued) 53, Netherlands Central Bank, Directorate Supervision. [Downloadable!]
  18. Philipp Hartmann & Angela Maddaloni & Simone Manganelli, 2003. "The Euro-area Financial System: Structure, Integration, and Policy Initiatives," Oxford Review of Economic Policy, Oxford University Press, vol. 19(1), pages 180-213.
    Other versions:
  19. Edward J. Kane, 2000. "Incentives for banking megamergers: what motives might regulators infer from event-study evidence?," Proceedings, Federal Reserve Bank of Cleveland, pages 671-705.
  20. 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)
  21. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 46(4), pages 433-52, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Enrique Benito, 2008. "Size, growth and bank dynamics," Banco de España Working Papers 0801, Banco de España. [Downloadable!]
  2. José Campa & Ignacio Hernando, 2008. "The Reaction by Industry Insiders to M&As in the European Financial Industry," Journal of Financial Services Research, Springer, vol. 33(2), pages 127-146, April. [Downloadable!] (restricted)
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