Wealth effects of Canadian financial services takeovers: consolidation, diversification and foreign evidence

Alex Ng

American Journal of Finance and Accounting, 2008, vol. 1, issue 2, 194-212

Abstract: This study analyses the wealth effects related to Merger and Acquisition (M&A) announcements in the Canadian financial services industry. This study more broadly portrays the Canadian M&A experience in examining a sample of 161 M&A deals from 1997 to 2000. Overall, M&A is related to significant and negative abnormal returns. Results show that the market neither rewards nor punishes consolidation M&A with nonsignificant abnormal returns. Diversification through M&A is related to a loss in shareholder wealth. The exception is for bank and investment acquisitions. The market punishes foreign M&A with negative abnormal returns, consistent with the literature on high-information costs and regulations. Moreover, acquisitions paid with stock and privately owned targets are negatively related to wealth. The findings imply that financial industry restructuring through M&A in response to deregulation does not create wealth gains.

Keywords: mergers; acquisitions; takeovers; financial services; wealth; Canada; foreign M&A; market performance; diversification; consolidation. (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ids:amerfa:v:1:y:2008:i:2:p:194-212

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