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Diversification versus Specialisation: An Event Study of M&As in the European Banking Industry

Author

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  • Laetitia Lepetit

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Stéphanie Patry

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Philippe Rous

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

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. We classify M&As according to activity, geographic specialisation or diversification. A Bivariate GARCH model is used to estimate abnormal returns taking beta variability into account. Our results document that there is, on average, a positive and significant increase in value for the group of targets' banks. Moreover, we find that on average there is a positive and significant market reaction for the two types of transactions: cross-product diversification and geographic specialisation.

Suggested Citation

  • Laetitia Lepetit & Stéphanie Patry & Philippe Rous, 2004. "Diversification versus Specialisation: An Event Study of M&As in the European Banking Industry," Post-Print hal-00804954, HAL.
    • Handle: RePEc:hal:journl:hal-00804954
    DOI: 10.1080/0960310042000233430
    Note: View the original document on HAL open archive server: https://unilim.hal.science/hal-00804954
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    References listed on IDEAS

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    1. 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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    3. 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.
    4. 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.
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    1. 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.
    2. Minzhi Wu & Emili Tortosa-Ausina, 2020. "Bank Diversification and Focus in Disruptive Times: China, 2007–2018," Working Papers 2020/21, Economics Department, Universitat Jaume I, Castellón (Spain).
    3. Caiazza, Stefano & Pozzolo, Alberto Franco & Trovato, Giovanni, 2011. "Do domestic and cross-border M&As differ? Cross-country evidence from the banking sector," Economics & Statistics Discussion Papers esdp11061, University of Molise, Department of Economics.
    4. Asimakopoulos, Ioannis & Athanasoglou, Panayiotis P., 2013. "Revisiting the merger and acquisition performance of European banks," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 237-249.
    5. 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.
    6. Heechul Min & Wook Sohn, 2008. "Closing inefficient affiliates: evidence from Korean conglomerates," Applied Financial Economics, Taylor & Francis Journals, vol. 18(16), pages 1351-1361.
    7. Hagendorff, Jens & Collins, Michael & Keasey, Kevin, 2008. "Investor protection and the value effects of bank merger announcements in Europe and the US," Journal of Banking & Finance, Elsevier, vol. 32(7), pages 1333-1348, July.
    8. Leledakis, George N. & Pyrgiotakis, Emmanouil G., 2019. "Market concentration and bank M&As: Evidence from the European sovereign debt crisis," MPRA Paper 95739, University Library of Munich, Germany.
    9. Aristeidis Samitas & Dimitris Kenourgios & Peter Zounis, 2008. "Athens' Olympic Games 2004 impact on sponsors' stock returns," Applied Financial Economics, Taylor & Francis Journals, vol. 18(19), pages 1569-1580.
    10. Tampakoudis, Ioannis & Nerantzidis, Michail & Eweje, Gabriel & Leventis, Stergios, 2022. "The impact of gender diversity on shareholder wealth: Evidence from European bank M&A," Journal of Financial Stability, Elsevier, vol. 60(C).
    11. Kathy Estes, 2014. "Diversification and Community Bank Performanceduringa Financial Crisis," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 3(4), pages 01-40, October.
    12. Peter Egger & Franz R. Hahn, 2006. "Endogenous Bank Mergers and Their Impact on Banking Performance," WIFO Working Papers 271, WIFO.
    13. Manapol Ekkayokkaya & Phil Holmes & Krishna Paudyal, 2009. "The Euro and the Changing Face of European Banking: Evidence from Mergers and Acquisitions," European Financial Management, European Financial Management Association, vol. 15(2), pages 451-476, March.
    14. Céline Crouzille & Laetitia Lepetit & Carlos Bautista, 2008. "How Did The Asian Stock Markets React To Bank Mergers After The 1997 Financial Crisis?," Pacific Economic Review, Wiley Blackwell, vol. 13(2), pages 171-182, May.
    15. 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;Western Finance Association, vol. 36(2), pages 87-110, December.
    16. 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.
    17. John S. Howe & Thibaut G. Morillon, 2017. "Do Mergers and Acquisitions Affect Information Asymmetry in the Banking Sector?," NFI Working Papers 2017-WP-01, Indiana State University, Scott College of Business, Networks Financial Institute.

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