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Causal effect of mergers and acquisitions on EU bank productivity

Author

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  • Abdussalam Aljadani

    (Taibah University)

  • Hassen Toumi

    (Taibah University
    University of Economics and Management of Sfax, (URED))

Abstract

This paper examines the causal effect of mergers and acquisitions (M&A) on bank productivity (Q) in 23 European Union countries and the short- and long-term relationship among fixed assets (k1), liquid assets (k2), and labour (L) over the period 1990–2013 for a sample of 156 commercial banks, of which 60 entities have acquired at least one other entity. Granger causality tests on our results reveal unidirectional causality from liquid assets to fixed assets. However, the causality between K2 and L is unobservable, and the linkage between fixed assets and labour is bidirectional. The error correction term (ECT) is negative and statistically significant for all models, which denotes the presence of bidirectional relationship among all selected variables and long-term unidirectional causality from mergers and acquisitions to bank productivity. Our long-term dynamic panel estimates indicate that the strategic fit of mergers and acquisitions has the potential to create long-term productivity improvement.

Suggested Citation

  • Abdussalam Aljadani & Hassen Toumi, 2019. "Causal effect of mergers and acquisitions on EU bank productivity," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-22, December.
    • Handle: RePEc:spr:jecstr:v:8:y:2019:i:1:d:10.1186_s40008-019-0176-9
    DOI: 10.1186/s40008-019-0176-9
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    Cited by:

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    More about this item

    Keywords

    Mergers and acquisitions (M&A); Productivity; Panel cointegration techniques;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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