Market Reactions to Fintech M&A: Evidence from Event Study Analysis of Financial Institutions

Gimede Gigante (), Lorenzo Galotta and Francesca Scarlini
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Gimede Gigante: Department of Finance, Bocconi University, Via Röntgen 1, 20136 Milan, Italy
Lorenzo Galotta: Department of Finance, Bocconi University, Via Röntgen 1, 20136 Milan, Italy
Francesca Scarlini: Department of Finance, Bocconi University, Via Röntgen 1, 20136 Milan, Italy

JRFM, 2025, vol. 18, issue 10, 1-24

Abstract: The rise of fintech has disrupted traditional financial services, prompting banks and asset managers to respond strategically, often through mergers and acquisitions. This study investigates the short-term market reaction to M&A announcements involving fintech targets by incumbent financial institutions. Using an event study methodology centered on different event windows and cumulative abnormal returns computed via the market model, the analysis incorporates regression models with bidder-, deal-, and target-level variables to identify the drivers of performance. The results show that, on average, financial institutions experience negative abnormal returns around announcement dates, suggesting limited short-term value creation. Higher market-to-book ratios and tax rates are positively associated with CARs, while lower profit margins are linked to better market reactions. Subsample comparisons reveal that U.S. acquirers underperform their European peers, commercial banks fare worse than asset managers and investment banks, and pre-COVID-19 deals yield more favorable returns than post-COVID-19 ones. Robustness checks using different market benchmarks demonstrate that key patterns—especially those related to geography and timing—are sensitive to benchmark selection. Overall, this study highlights market skepticism toward fintech acquisitions by traditional financial institutions, particularly in specific contexts, and emphasizes the importance of controlling for structural factors when interpreting abnormal returns.

Keywords: financial institutions; mergers and acquisitions; event study; asset management; fintech; cumulative abnormal returns (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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