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Do M&As in the EU banking industry lead to an increase in performance?

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  • Elena Beccalli

    (University of Macerata)

  • Pascal Frantz

    (London School of Economics)

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    Abstract

    � This paper investigates whether M&A operations influence the performance of banks. Using a sample of 714 deals involving EU acquirers and targets located throughout the world over the period 1991-2005, we investigate whether M&A operations are associated with improved performance (measured using both standard accounting ratios and cost and alternative profit X-efficiency measures). Despite the extensive and ongoing consolidation process in the banking industry, we find that M&A operations are associated with a slight deterioration in return on equity, cash flow return and profit efficiency and with a marked improvement in cost efficiency. Hence, the improvements in cost efficiency appear to be transferred to bank clients. These changes in performance are directly attributable to the M&A operations, and would not have occurred in their absence. Moreover, these changes exhibit a particularly negative trend for cross-border deals to testify the importance of geographical relatedness in order to achieve better post-M&A performance. The environmental and bank-characteristics that make a deal successful or unsuccessful are finally identified.

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    Bibliographic Info

    Paper provided by Macerata University, Department of Finance and Economic Sciences in its series Working Papers with number 50-2008.

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    Date of creation: Dec 2008
    Date of revision: Dec 2009
    Publication status: Published as: E. Beccalli, P. Frantz: 2009, 'M&A operations and performance in banking', Journal of Financial Services Research, n. 36(2), pp. 203-226.
    Handle: RePEc:mcr:wpdief:wpaper00050

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