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The reaction by industry insiders to M&As in the European financial industry

  • José M. Campa

    ()

    (IESE Business School)

  • Ignacio Hernando

    ()

    (Banco de España)

This paper looks at the reaction by industry insiders, industry analysts and competing firms, to the announcement of M&As that took place in the European Union financial industry in the period 1998-2006. Analysts covering firms involved in an M&A transaction do not significantly alter their recommendation. This is consistent with the hypothesis that the transaction on average is "fairly priced" and that stock market prices reflect all relevant information on the assets. We also find that the correlation between excess returns for merging and competing firms is positive and, in some cases, significantly higher for domestic mergers than for international deals. This is consistent with the idea that domestic deals are more likely to have a negative impact on industry competition.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0713e.pdf
File Function: First version, May 2007
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0713.

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Length: 26 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:bde:wpaper:0713
Contact details of provider: Web page: http://www.bde.es/
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