What do premiums paid for bank M&As reflect? The case of the European Union

Jens Hagendorff (), Ignacio Hernando (), María Nieto () and Larry Wall
Additional contact information
Jens Hagendorff: University of Leeds
Ignacio Hernando: Banco de España
María Nieto: Banco de España

No 1011, Working Papers from Banco de España

Abstract: We analyze the takeover premiums paid for a sample of European bank mergers between 1997 and 2007. We find that acquiring banks value profitable, high-growth and low risk targets. We also find that the strength of bank regulation and supervision as well as deposit insurance regimes in Europe have measurable effects on takeover pricing. Stricter bank regulatory regimes and stronger deposit insurance schemes lower the takeover premiums paid by acquiring banks. This result, presumably in anticipation of higher compliance costs, is mainly driven by domestic deals. Also, we find no conclusive evidence that bidders seek to extract benefits from regulators either by paying a premium for deals in less regulated regimes or by becoming "too big to fail".

Keywords: banks; mergers; premiums; European Union (search for similar items in EconPapers)
JEL-codes: G21 G28 G34 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-04
New Economics Papers: this item is included in nep-ban, nep-eur, nep-fmk and nep-reg
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Citations: View citations in EconPapers (3)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/10/Fic/dt1011e.pdf First version, April 2010 (application/pdf)

Related works:
Journal Article: What do premiums paid for bank M&As reflect? The case of the European Union (2012)
Working Paper: What do premiums paid for bank M&As reflect? the case of the European Union (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1011

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